Suppose that a new alloy is invented which uses copper and zinc in fixed proportions where 1 unit of output requires 3 units of copper and 3 units of zinc for each unit of alloy produced. If no other inputs are needed, the price of copper is $3, and the price of zinc is $3, what is the average cost per unit when 4,000 units of the alloy are produced?

$18 per unit

Explanation:

Average cost per unit is the cot of the product to product on average basis. Any product uses different costs to produce like material, Labor and overheads.

In this question there is only material cost of Copper and Zinc material to make Alloy.

Total Cost = 4,000 units [($3x3)+($3x3)] = $72,000

Average cost per unit = Total Cost / Total numbers of unit

Average cost per unit = $72,000 / 4,000 = $18 per unit

the average cost per unit when 4,000 units of the alloy are produced : $18.00

Explanation:

Step 1. Calcutate the the Unit Cost of the New

Materials Costs

Copper (3 units × $3) = $9.00

Zinc (3 units $3)         = $9.00

Total                           = $18.00

Step 2 Calculate the Total Cost of the New

Total Cost=Unit Cost × Total Units of Production

                = $18.00 × 4,000 units

                = $72,000