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In March, Olimpia SA had the following costs related to the production of 10,000 units: Direct...

In March, Olimpia SA had the following costs related to the production of 10,000 units:

Direct Materials $ 60,000

Variable direct labor $ 20,000

Plant rent $ 5,000

Machine depreciation (in a straight line) $ 4,000

Calculate the variable cost per unit:

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Answer #1

variable costs are those costs that vary along with the production, on the other hand fixed costs do not vary with the number of units produced they are fixed irrespective of units produced

Direct material - variable cost

Direct labour - variable cost

Plant rent - fixed cost

Depreciation - fixed cost

variable cost per unit = total variable cost / number of units produced

Total variable cost = 60,000+20,000 = 80,000

variable cost per unit = 80,000 / 10,000 = $8 per unit

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