The salespeople at Marin, a notebook manufacturer, commonly pressured operations managers to keep costs down so the company could give bigger discounts to large customers. Michael, the operations supervisor, leaked the $0.70 total unit cost to salespeople, who were thrilled, since that was slightly lower than the previous years unit cost. Budgets were not yet finalized for the upcoming year, so it was unclear what the target unit cost would be. Michael knew the current years operating capacity was two million notebooks, and Marin produced and sold just that many. The detailed breakdown of the $0.70 total unit cost is as follows. Direct material $0.15 Direct labor 0.20 Variable overhead 0.15 Fixed overhead 0.20 Total cost per unit $0.70

If Marin reworks its equipment layout and processes to increase the top end of its relevant range of activity to 2,500,000 notebooks without incurring more fixed costs,

what happens to the fixed cost per unit if it is able to make and sell that larger quantity of units? (increase or decrease)

Fixed costs by $ per unit

Total cost per unit $ per unit

Gross margin $