Hara Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $159.80 per unit. The best estimate of the total variable cost per unit is:
A) $77.00
B) $60.60
C) $149.10
D) $138.80

Question

Hara Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $159.80 per unit.  The best estimate of the total variable cost per unit is:
A) $77.00 
B) $60.60 
C) $149.10 
D) $138.80

Quizplus · Accepted Answer

Variable cost of sales = Change in cost ÷ Change in activity
= ($424,200 - $363,600) ÷ (7,000 units - 6,000 units)
= $60,600 ÷ 1,000 units
= $60.60 per unit
Variable selling and administrative cost = Change in cost ÷ Change in activity
= ($547,400 - $531,000) ÷ (7,000 units - 6,000 units)
= $16,400 ÷ 1,000 units
= $16.40 per unit
Total variable cost = Variable cost of sales + Variable selling and administrative cost
= $60.60 per unit + $16.40 per unit
= $77.00 per unit

Hara Corporation Is a Wholesaler That Sells a Single Product