Question

Explain “Per unit” cost behavior for Fixed costs. Provide two examples of “per unit” cost behavior for fixed costs.

Answer 1

Fixed costs, Cost which will remain constant in total regardless of the number of units produced or sold. So, fixed costs per unit will change based on number of units produced or sold. per unit cost will decrease based on increase in number of units sold or produced.

Example: Depreciation Expenses, Rent Expenses

assume total depreciation is USD 10,000. so when a company produce 10,000 units, then fixed cost per unit will be USD 1, if the number units produced increased to 20,000, then per unit cost will decrease to 0.50

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