Units: 1000
Item: Raw Material (cost for hamburgers) (Variable)
Total Annual Cost: 650
Item: Rent (Fixed)
Total Annual Cost: 9000
Raw materials are a variable cost and the building rent is a fixed cost because the variable cost changes based on how many units are sold but the cost per unit stays the same so it will be fixed and rent will not change based on production when using the relevant range but the fixed cost per each unit will change (Horngren et al., 2008).
When we calculate the variable cost per unit at 1,000 units of sales; it does not change when sales increase. Since we are staying with the relevant range the total fixed cost will not change with the change in units sold (Horngren et al., 2008).
Requirement # (2) at 1,000 Units
The cost per unit of the material is: .65 cents per unit ($650/1,000 units).
The cost per unit for rent is: $9.00 per unit ($9,000/1000 units)
Total variable cost .65 x 1,000= 650
Total fixed cost = 9,000
Total fixed and variable = 9,650
Requirement # (3) at 6,000 Units
Variable cost per unit is .65 (it does not change)
Total of variable cost = .65 cost per unit x 6,000 total units = $3,900
Unit cost of fixed cost = $9,000/6,000 Units = 1.50
Total annual cost of fixed cost = $9,000
Total fixed and variable = 12,900
Requirement # (4) 8,000 Units
Variable cost per unit is .65 (it does not change)
Total variable cost = .65 cost per unit x 8,000 total units = $5,200
Unit cost of fixed cost = $9,000/8,000 Units = 1.125
Total annual cost of fixed cost = ...