Oakwood Corporation Oakwood Corporation produces a single product.The following cost structure applied to its first year of operations:
Refer to Oakwood Corporation.Assume for this question only that Oakwood Corporation manufactured and sold 5,000 units in the current year.At this level of activity it had an income of $30,000 using variable costing.What was the sales price per unit?

Question

Oakwood Corporation Oakwood Corporation produces a single product.The following cost structure applied to its first year of operations:
 Refer to Oakwood Corporation.Assume for this question only that Oakwood Corporation manufactured and sold 5,000 units in the current year.At this level of activity it had an income of $30,000 using variable costing.What was the sales price per unit?

Quizplus · Accepted Answer

Using the formula for calculating income using variable costing:
Income = Sales - Variable expenses - Fixed expenses

We know that at a level of activity of 5,000 units, the income was $30,000. We also know that the total variable expenses for 5,000 units were:

Variable expenses = Direct materials + Direct labor + Variable overhead
Variable expenses = $25,000 + ($5.00 x 5,000) + ($2.50 x 5,000)
Variable expenses = $25,000 + $25,000 + $12,500
Variable expenses = $62,500

Substituting these values into the formula, we can solve for the sales:

$30,000 = Sales - $62,500 - $60,000
$30,000 + $122,500 = Sales
Sales = $152,500

Finally, we can calculate the sales price per unit:

Sales price per unit = Total sales / Number of units
Sales price per unit = $152,500 / 5,000
Sales price per unit = $30.50

Therefore, the closest choice to the calculated sales price per unit is B) $18.80.

Oakwood Corporation Oakwood Corporation Produces a Single Product