What is the approximate cost per unit in rupees, if the company produces and sells 1400 units in the year 2007?
Explanation:
Observing the values through the years, we can say that Material, Labour and Operating costs directly vary with the change in volume of production.
The other costs are almost constant.
If the production is x units, the variable cost for material, labour and operation is 50x, 20x and 30x respectively.
∴ Total variable cost = 100x
Total fixed cost (using information for 2006) = 1400 + 1200 + 400 + 800 + 5800 = 9600
∴ Total cost of producing x units = 100x + 9600
Now, x = 1400
Cost per unit = (1400 × 100 + 9600)/1400 = 106.85
Hence, option (b).
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