Question

10

The per-unit cost of an item is its average total cost (= total cost/quantity). Suppose that a new cell phone application costs $200,000 to develop and only $0.70 per unit to deliver to each cell phone customer.

**Instructions:** Round your answers to 2 decimal
places.

a. What will be the per-unit cost of the application if it sells 100 units?

b. What will be the per-unit cost of the application if it sells 1,000 units?

c. What will be the per-unit cost of the application if it sells 1 million units?

Answer #1

*ANSWER:*

*1) 100 Units*

*total cost = development cost + per unit cost * no
of units = $200,000 + $0.70 * 100 = $200,000 + $70 =
$200,070*

*per unit cost = total cost / no of units = $200,070
/ 100 = $2,000.70*

*2) 1,000 Units*

*total cost = development cost + per unit cost * no
of units = $200,000 + $0.70 * 1000 = $200,000 + $700 =
$200,700*

*per unit cost = total cost / no of units = $200,700
/ 1000 = $200.7*

*3) 1,000,000 Units*

*total cost = development cost + per unit cost * no
of units = $200,000 + $0.70 * 1,000,000 = $200,000 + $700,000 =
$900,000*

*per unit cost = total cost / no of units = $900,000
/ 1,000,000 = $0.90*

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