Answer:
Toys produced         40,000     80,000      120,000
Total costs:
Total variable costs    $720,000   $1,440,000   $2,160,000
Total fixed costs      $600,000    $600,000     $600,000
Total costs          $1,320,000  $2,040,000   $2,760,000
Cost per Unit
Variable cost          $18          $18           $18
Fixed cost             $15          $7.50          $5
Total cost             $33         $25.50        $23
Fixed costs do not change with total output, they are the same regardless so the number of units produced. Variable costs change proportionally to any change in total output. If total output increases, variable costs will increase.
