At a production level of 5,600 units, a project has total costs of $89,000 and a variable cost per unit of $11.20. What is the amount of the total fixed costs?
Question
At a production level of 5,600 units, a project has total costs of 11.20. What is the amount of the total fixed costs?
Solution
To calculate the total fixed costs, we first need to find the total variable costs and then subtract this from the total costs.
Step 1: Calculate the total variable costs The total variable costs can be calculated by multiplying the variable cost per unit by the number of units produced. In this case, the variable cost per unit is $11.20 and the number of units produced is 5,600.
Total variable costs = Variable cost per unit * Number of units produced Total variable costs = 62,720
Step 2: Calculate the total fixed costs The total fixed costs can be calculated by subtracting the total variable costs from the total costs. In this case, the total costs are 62,720.
Total fixed costs = Total costs - Total variable costs Total fixed costs = 62,720 = $26,280
So, the total fixed costs are $26,280.
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