Which of the following is a fixed cost? Multiple Choice A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000. A cost that is $28.00 per unit when production is 70,000, and $56.00 per unit when production is 112,000.

Choice A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000

Explanation:

Fixed cost is cost that does not vary with production.

It is the same no matter the level of output.

Examples of fixed cost is rent.

To determine which cost is fixed cost, find the total fixed cost.

For choice A : $28.00 × 70,000 = $1,960,000

 $17.50 x 112,000 = $1,960,000

The total cost is the same for each unit of output, therefore, choice a is a fixed cost.

For choice B : $28 × 70,000 = $1,960,000

$56.00 x 112,000 = $6,272,000

The total varies, so one can conclude that choice B contains variable cost.

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