A firm is reviewing a project with a labor cost of $18.90 per unit,raw materials cost of $21.63 a unit,and fixed costs of $8,000 a month.Sales are projected at 7,200 units total for the 3-year life of the project.What are the total variable costs per year?
A)$106,300
B)$99,300
C)$97,272
D)$103,300
E)$109,300

Question

Quizplus · Accepted Answer

The total variable costs per year are calculated by adding the labor cost per unit to the raw materials cost per unit and then multiplying by the total units sold per year. Labor cost per unit is $18.90, and raw materials cost per unit is $21.63, so the total variable cost per unit is $18.90 + $21.63 = $40.53. The project's sales are projected at 7,200 units over 3 years, so per year, the sales would be 7,200 units / 3 years = 2,400 units per year. Therefore, the total variable costs per year are 2,400 units/year * $40.53/unit = $97,272.

A Firm Is Reviewing a Project with a Labor Cost