Which cost is the cost per unit on average?

Which cost is the cost per unit on average?

• A. Fixed costs
• B. Variable costs
• C. Total costs
• D. Average costs

Answer: (D)

The concept being tested is how to measure the cost per unit when you produce a certain level of output. The cost per unit on average is the average cost, which shows how much each unit costs on average when you spread the total cost across all units produced. You get it by dividing total cost by the quantity produced, so it incorporates both fixed costs (which don’t vary with output) and variable costs (which do vary with output). This makes it different from fixed costs (which stay the same per level of output), variable costs (which change with output), or total costs (the full sum of fixed and variable costs at a given output). Therefore, the term that matches “cost per unit on average” is average costs.

The concept being tested is how to measure the cost per unit when you produce a certain level of output. The cost per unit on average is the average cost, which shows how much each unit costs on average when you spread the total cost across all units produced. You get it by dividing total cost by the quantity produced, so it incorporates both fixed costs (which don’t vary with output) and variable costs (which do vary with output). This makes it different from fixed costs (which stay the same per level of output), variable costs (which change with output), or total costs (the full sum of fixed and variable costs at a given output). Therefore, the term that matches “cost per unit on average” is average costs.