Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 50,000 units at $5.00/unit. Below is a listing of estimated expenses: A Canadian firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility.
The unit variable cost for Garfield Corporation is

Question

Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new plant to be 50,000 units at $5.00/unit. Below is a listing of estimated expenses:  A Canadian firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility.
The unit variable cost for Garfield Corporation is

Quizplus · Accepted Answer

To calculate the unit variable cost, we need to subtract the total variable cost per unit from the sales price. The total variable cost is $2.40 ($0.60 material + $1.20 labor + $0.60 variable overhead). Therefore, the unit variable cost is $5.00 - $2.40 = $2.60. However, we need to add the commission that the Canadian firm will receive, which is 10% of the sales price, or $0.50/unit ($5.00 x 0.10). Thus, the unit variable cost is $2.60 + $0.50 = $3.10. Therefore, the correct answer is B.

Garfield Corporation Is Considering Building a New Plant in Canada