A business hires machinery at a cost of $700 per machine per month. Each machine can produce 1000 units a month. A maximum of 10 machines can fit into the factory. The factory rent is $4900 per month. Other costs amount to $2 per unit.
What is the unit cost if 8500 units are produced in a month?

Q: What topic does this question test?

This question tests Cost Classification / Unit Costing in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting May/June 2018 examination, Paper 1 Variant 2 (9706_s18_qp_12.pdf).

Question

A business hires machinery at a cost of $700 per machine per month. Each machine can produce 1000 units a month. A maximum of 10 machines can fit into the factory. The factory rent is $4900 per month. Other costs amount to $2 per unit.
What is the unit cost if 8500 units are produced in a month?

Oracle Prep · Accepted Answer

The correct answer is D: $3.32.

A business hires machinery at a cost of $700 per machine per month. Each machine can produce 1000 units a month. A maximum of 10 machines can fit into the factory. The factory rent is $4900 per month. Other costs amount to $2 per unit. What is the unit cost if 8500 units are produced in a month?

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