Harrison Carpets incurred the following costs for March when 3,000 square feet of carpet were produced and sold:
- $18,500 for nylon thread used on carpet
- $5,000 for scotch guard for carpet
- $7,200 for jute backing to reinforce the carpet
- $6,800 for glue to be used in the manufacturing process
- $13,000 for insurance (half for administrative activities, half for production activities)
- $9,000 for production employees' wages
- $6,500 for rent and utilities in the factory
How much are total variable costs if 3,500 square feet of carpet are produced and sold in April?
A)$77,000
B)$46,500
C)$54,250
D)$43,750

Question

Quizplus · Accepted Answer

The only variable costs listed in the given data are the costs of nylon thread, scotch guard, jute backing, glue, and production employees' wages. These costs would increase in proportion to the amount produced and sold in April.

To calculate the total variable cost for April, we need to determine the cost per square foot for each variable cost item:
Nylon thread: $18,500 / 3,000 sq ft = $6.17 per sq ft
Scotch guard: $5,000 / 3,000 sq ft = $1.67 per sq ft
Jute backing: $7,200 / 3,000 sq ft = $2.40 per sq ft
Glue: $6,800 / 3,000 sq ft = $2.27 per sq ft
Production employees' wages: $9,000 / 3,000 sq ft = $3.00 per sq ft

Total variable cost per sq ft = $6.17 + $1.67 + $2.40 + $2.27 + $3.00 = $15.51

Therefore, for 3,500 sq ft produced and sold in April, total variable costs would be:

Total variable cost = $15.51 x 3,500 sq ft = $54,285

Rounding up to the nearest $, we get $54,250. Therefore, the answer is C.

Harrison Carpets Incurred the Following Costs for March When 3,000