Callis 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 $141.60 per unit. The best estimate of the total variable cost per unit is:
A)$131.80
B)$53.10
C)$66.40
D)$120.90

Question

Callis 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 $141.60 per unit.  The best estimate of the total variable cost per unit is:
A)$131.80 
B)$53.10 
C)$66.40 
D)$120.90

Quizplus · Accepted Answer

Cost of sales:
Because cost of sales is a variable cost,there are several ways to compute the variable cost per unit.Here is one:
Variable cost per unit = Change in cost ÷ Change in activity
= ($318,600 - $265,500)÷ (6,000 units - 5,000 units)
= $53,100 ÷ 1,000 units
= $53.10 per unit
Selling and administrative costs:
Variable cost per unit = Change in cost ÷ Change in activity
= ($406,800 - $393,500)÷ (6,000 units - 5,000 units)
= $13,300 ÷ 1,000 units
= $13.30 per unit
Total cost per unit = $53.10 per unit + $13.30 per unit = $66.40

Callis Corporation Is a Wholesaler That Sells a Single Product