Question

	20,000 hrs	30,000 hrs	40,000 hrs
variable costs	?	?	?
Variable cost per hr	?	?	$3.00
fixed costs	?	$200,000	?
fixed cost per hr	?	?	?
total costs	?	?	?
total cost per hr	?	?	?

Fill in the missing numbers.

What would be the variable costs and fixed costs at 25,000 hours of activity?

Answer 1

Fixed cost in totality remains same but would decrease at per unit level if production increase on the other hand variable cost increase and decrease in totality but remains same at unit level.

Solution

	20,000 hrs	30,000 hrs	40,000 hrs
variable costs	$      60,000.00	$     90,000.00	$ 1,20,000.00
Variable cost per hr	$                 3.00	$                3.00	$                3.00
fixed costs	$ 2,00,000.00	$ 2,00,000.00	$ 2,00,000.00
fixed cost per hr	$              10.00	$                6.67	$                5.00
total costs	$ 2,60,000.00	$ 2,90,000.00	$ 3,20,000.00
total cost per hr	$              13.00	$                9.67	$                8.00

Working

	20,000 hrs	30,000 hrs	40,000 hrs
variable costs	=3*20000	=3*30000	=3*40000
Variable cost per hr	3	3	3
fixed costs	200000	200000	200000
fixed cost per hr	=200000/20000	=200000/30000	=200000/40000
total costs	=200000+60000	=200000+90000	=200000+120000
total cost per hr	=260000/20000	=290000/30000	=320000/40000