factory currently manufactures and sells 800 boats per year. Each boat costs $5,000 to produce. $4,000 of the per-boat costs are for materials and other variable costs, while the per-boat fixed costs (incurred on yearly rent, administrative, and other fixed costs) are $1,000. If boat orders increase to 1000 boats per year, how do per-unit costs change? 1) Variable costs fall to $3,200 per boat and fixed costs fall to $800 per boat 2) Variable costs are unchanged at $4,000 per boat and fixed costs fall to $800 per boat 3) Variable costs are unchanged at $4,000 per boat and fixed costs are unchanged at $1,000 per boat 4) Variable costs rise to $5,000 per boat and fixed costs are unchanged at $1,000 per boat
A factory currently manufactures and sells 800 boats per year. Each boat costs $5,000 to produce. $4,000 of the per-boat costs are for materials and other variable costs, while the per-boat fixed costs (incurred on yearly rent, administrative, and other fixed costs) are $1,000. If boat orders increase to 1000 boats per year, how do per-unit costs change?
1) Variable costs fall to $3,200 per boat and fixed costs fall to $800 per boat
2) Variable costs are unchanged at $4,000 per boat and fixed costs fall to $800 per boat
3) Variable costs are unchanged at $4,000 per boat and fixed costs are unchanged at $1,000 per boat
4) Variable costs rise to $5,000 per boat and fixed costs are unchanged at $1,000 per boat
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