Future Business Leaders of America (FBLA) Marketing Practice Test

What is the incremental cost per unit of the second 500 units if 500 units cost $120,500 and 1000 units cost $200,000?

1. $159.00

2. $150.00

3. $155.00

4. $160.00

The correct answer is: $159.00

To determine the incremental cost per unit of the second set of 500 units, we must first calculate the total cost of producing each set of units and then find the difference in cost between the two levels of production. The cost of producing the first 500 units is $120,500. The total cost of producing 1000 units is $200,000. To find the cost incurred for producing the second batch of 500 units, we subtract the cost of the first 500 units from the total cost of 1000 units: Total cost for 1000 units - Total cost for 500 units = Cost of the second 500 units $200,000 - $120,500 = $79,500 Now, to find the incremental cost per unit for the second 500 units, divide the cost of the second set by the number of units in that batch: Cost of the second 500 units / Number of units = Incremental cost per unit $79,500 / 500 = $159.00 This calculation shows that the cost of producing each unit in the second batch of 500 is $159.00, making it the correct answer. The other options present different values that do not accurately reflect