Ships Ahoy is a small company that makes model sailboat kits priced at $120.The costs of the materials that go into each kit are $45.It costs $5 in labour to assemble a kit.The company has monthly expenses of $1,000 for rent and insurance,$200 for heat and electricity,$500 for advertising,and $3,500 for the monthly salary of its owner.Ships Ahoy's unit variable cost for its kits is:
A)$45.
B)$50.
C)$120.
D)$170.

Question

Quizplus · Accepted Answer

The unit variable cost is the sum of the costs that vary with the production of each kit, which in this case are the costs of materials and labour.

Unit variable cost = Cost of materials + Cost of labour 
Unit variable cost = $45 + $5 
Unit variable cost = $50

Therefore, the best choice is (B) $50.

Ships Ahoy Is a Small Company That Makes Model Sailboat