Figure 3-6.Taran Company incurred the following costs for the months of January and February.
-Refer to Figure 3-6. Assume that output was 5,000 units in January and 10,000 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $3,000. What was the variable rate per unit of output for utilities cost?
A) $0.60
B) $0.40
C) $0.20
D) $0.30

Question

Figure 3-6.Taran Company incurred the following costs for the months of January and February. 
-Refer to Figure 3-6. Assume that output was 5,000 units in January and 10,000 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $3,000. What was the variable rate per unit of output for utilities cost?
A) $0.60 
B) $0.40 
C) $0.20 
D) $0.30

Quizplus · Accepted Answer

To find the variable rate per unit, calculate the change in total cost divided by the change in output. If the fixed cost is $3,000, then the variable cost for 5,000 units is the total cost minus $3,000. Similarly, calculate for 10,000 units. The difference in variable costs divided by the difference in units (5,000) gives the variable rate per unit, which is $0.20.