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What is the average cost per unit at a production level

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Question - Lee Corp. is looking to introduce a new product with an 80% cumulative learning curve for production batches of 500 units. The variable production and selling costs, all subject to learning, are $20 per unit for the first 1,000-unit batch. There are $15,000 in fixed costs not subject to learning.

1. What is the average cost per unit at a production level of 2,000 units?

a. $18.20

b. $23.50

c. $26.40

d. $32.60

2. If the Lee Company can sell all it produces for $20 per unit, what is the profit or loss at a production and sales level of 4,000 units?

a. No profit or loss

b. $13,800 profit

c. $24,040 profit

d. $10,350 loss

Reference no: EM131795132

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