ECONOMIC PROBLEM

Economic Problem

Economic Problem

Fixed charges such as rent or a supervisor's wages will not change in total inside a reasonable variety of volume or activity. For demonstration, the lease might be $2,500 per month and the supervisor's wages might be $3,500 per month. This total repaired cost of $6,000 per month will be the identical if the capacity is 3,000 flats or 4,000 flats.

On the other hand, the repaired cost per unit will change as the level of capacity or activity changes. Uvocalise the allowances overhead, the fixed cost per unit is $2 when the capacity is 3,000 units ($6,000 split up by 3,000 units). When ...