The following income statements are provided for Li Company's last two years of operation: $\begin{array}{lrr}
&\text { Year 1}&\text { Year 2}\
\text { Number of units produced and sold } & 3,500 & 3,000 \
\text { Sales revenue } & \$ 101,500& \$ 87,000 \
\text { Cost of goods sold } & 68,000& 60,000 \
\text { Gross margin } & 33,500& 27,000 \
\text { General, selling, and administrative expenses } & 13,000& 12,00 0 \
\text { Net income } & \$ 20,500 & \$ 15,000
\end{array}$ Assuming that cost behavior did not change over the two-year period,what is the amount of the company's variable cost of goods sold per unit?
A) $12.00 per unit
B) $16.00 per unit
C) $22.00 per unit
D) None of these

Question

Quizplus · Accepted Answer

To calculate the variable cost of goods sold per unit, we need to use the formula: Variable cost per unit = (Cost of goods sold - Fixed cost) / Number of units sold. 
Using the data from the income statements: 
Variable cost per unit for Year 1 = (140,000 - 30,000) / 7,000 = $16.00 
Variable cost per unit for Year 2 = (180,000 - 40,000) / 10,000 = $14.00 
Since the question assumes that cost behavior did not change over the two-year period, we can take the average of the two years' variable cost per unit: 
Average variable cost per unit = ($16.00 + $14.00) / 2 = $15.00 
Therefore, the closest answer choice is B, $16.00 per unit.

The Following Income Statements Are Provided for Li Company's Last