ENTREPRENEURIAL PLANNING
BUSINESS PLAN DEVELOPMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A business sells 12, 000 units per year. Fixed costs per year are £50, 000 and variable costs are £2.50 per unit. The business’s total costs are:
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£30, 000
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£54, 800
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£62, 000
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£80, 000
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Explanation:
Detailed explanation-1: -To calculate the total cost, add the average fixed cost per unit to the average variable cost per unit. Multiply this by the total number of units to derive the total cost. The total cost formula is important because it helps management calculate the profitability of their business.
Detailed explanation-2: -A variable cost is a corporate expense that changes in proportion to how much a company produces or sells. Variable costs increase or decrease depending on a company’s production or sales volume-they rise as production increases and fall as production decreases.
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