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The per-unit cost of an item is its average total cost (= total cost/quantity). Suppose that a new cell phone application costs $200,000 to develop and only $0.70 per unit to deliver to each cell phone customer.
Instructions: Round your answers to 2 decimal places.
a. What will be the per-unit cost of the application if it sells 100 units?
b. What will be the per-unit cost of the application if it sells 1,000 units?
c. What will be the per-unit cost of the application if it sells 1 million units?
ANSWER:
1) 100 Units
total cost = development cost + per unit cost * no of units = $200,000 + $0.70 * 100 = $200,000 + $70 = $200,070
per unit cost = total cost / no of units = $200,070 / 100 = $2,000.70
2) 1,000 Units
total cost = development cost + per unit cost * no of units = $200,000 + $0.70 * 1000 = $200,000 + $700 = $200,700
per unit cost = total cost / no of units = $200,700 / 1000 = $200.7
3) 1,000,000 Units
total cost = development cost + per unit cost * no of units = $200,000 + $0.70 * 1,000,000 = $200,000 + $700,000 = $900,000
per unit cost = total cost / no of units = $900,000 / 1,000,000 = $0.90
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