Question

For a single product line company, the Financial Manager has provided the following cost information for...

For a single product line company, the Financial Manager has provided the following cost information for two levels of monthly sales volume. The selling price per unit is $149.30.

Sales volume (units) 6,400 7,400

Cost of sales $373,120 $431,420

Selling and administrative costs $486,400 $510,600

Total variable cost per unit is estimated to be:

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Answer #1

Answer- Total variable cost per unit is estimated to be = $82.50 per unit.

Explanation- Total variable cost per unit = Variable cost of sales per unit+ Variable Selling and administrative costs

= $58.30 per unit +$24.20 per unit

= $82.50 per unit

Where- Variable cost of sales per unit = Change in cost of sales/Change in sales volume

= ($431420 - $373120)/ (7400 units- 6400 units)

= $58300/1000 units

= $58.30 per unit

Variable Selling and administrative cost per unit = Change in Selling and administrative costs/ Change in sales volume

= ($510600 -$486400)/ (7400 units- 6400 units)

= $24200/1000 units

= $24.20 per unit

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