Harris Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $84.40 per unit. The best estimate of the total variable cost per unit is:

Question

Harris Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $84.40 per unit.  The best estimate of the total variable cost per unit is:

Quizplus · Accepted Answer

Variable cost of sales = Change in cost ÷ Change in activity
= ($342, 000 - $285, 000)÷ (6, 000 units - 5, 000 units)
= $57, 000 ÷ 1, 000 units
= $57.00 per unit
Variable selling and administrative cost = Change in cost ÷ Change in activity
= ($120, 000 - $107, 500)÷ (6, 000 units - 5, 000 units)
= $12, 500 ÷ 1, 000 units
= $12.50 per unit
Total variable cost = Variable cost of sales + Variable selling and administrative cost
= $57.00 per unit + $12.50 per unit
= $69.50 per unit

Harris Corporation Is a Wholesaler That Sells a Single Product