Chocolate Company is considering the production of a new product.Chocolate Company has the following data available:
$\begin{array}{ll}
\text { Expected sales(units) over product life } & 15,000 \
\text { Variable production costs } & \$ 42 \text { per unit } \
\text { Variable selling costs } & \$ 16 \text { per unit } \
\text { Annual fixed production costs } & \$ 15,000 \
\text { Annual fixed selling costs } & \$ 5,000 \
\text { Research and development costs } & \$ 184,000
\end{array}$
What is the total variable cost of the product over the product life cycle?
A) $204,000
B) $716,000
C) $870,000
D) $880,000

Question

Quizplus · Accepted Answer

The total variable cost over the product life cycle is calculated by adding the variable production costs and variable selling costs for all units. For each unit, the variable costs are $42 (production) + $16 (selling) = $58. For 15,000 units, the total variable cost is 15,000 units * $58 per unit = $870,000.

Chocolate Company Is Considering the Production of a New Product