A Level Accounting (9706)•9706/12/M/J/18
Explanation
Average unit cost at 80% capacity Steps:
- Determine machines needed: 8000 units ÷ 1000 units/machine = 8 machines.
- Compute machinery and fixed costs: 8 × 4800 = $10400.
- Compute variable costs: 8000 × 16000.
- Unit cost: (16000) ÷ 8000 = $3.30. Why D is correct:
- Matches total actual costs (fixed rent plus hired machines plus variables) divided by produced units. Why the others are wrong:
- A: Allocates all fixed costs over full 10,000-unit capacity, yielding $3.18.
- B: Miscalculates fixed costs by prorating rent over wrong volume (e.g., 9,000 units).
- C: Errors in adding machinery costs or dividing by incorrect production level. Final answer: D
Topic: Traditional costing methods
Practice more A Level Accounting (9706) questions on mMCQ.me