(Appendix 5A) Callander 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 $140.50 per unit.

-The best estimate of the total variable cost per unit is:
A) $82.90
B) $128.50
C) $104.00
D) $125.00

Question

(Appendix 5A) Callander 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 $140.50 per unit.
 
-The best estimate of the total variable cost per unit is:
A) $82.90 
B) $128.50 
C) $104.00 
D) $125.00

Quizplus · Accepted Answer

Cost of sales:
Because cost of sales is a variable cost, there are several ways to compute the variable cost per unit. Here is one:
Variable cost per unit = Change in cost ÷ Change in activity
= ($580,300 - $497,400) ÷ (7,000 units - 6,000 units)
= $82,900 ÷ 1,000 units
= $82.90 per unit
Selling and administrative costs:
Variable cost per unit = Change in cost ÷ Change in activity
= ($294,700 - $273,600) ÷ (7,000 units - 6,000 units)
= $21,100 ÷ 1,000 units
= $21.10 per unit
Total variable cost per unit = $82.90 per unit + $21.10 per unit = $104.00

(Appendix 5A) Callander Corporation Is a Wholesaler That Sells a Single