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Total fixed costs are $480 whether 200 or 800 pizzas are sold. What is the fixed cost per pizza at a volume of 800 pizzas?
A$2.40 per pizza
B$0.60 per pizza
C$1.20 per pizza
D$0.80 per pizza
Answer & Solution
Correct answer: B. $0.60 per pizza
1. Total fixed cost stays at $480 across the relevant range, so only the divisor changes.
2. Fixed cost per unit is $480 divided by the number of units sold.
3. $480 divided by 800 pizzas gives $0.60 per pizza.
4. $2.40 is the figure at 200 pizzas, where the same $480 is spread over far fewer units.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 5.1 Introduction_
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