Dapper Hat Makers is in the business of designing and producing specialty hats. The material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time employees $250 per week. If Employee A makes 15 derbies in one week, what is the variable cost per derby? (Round to two decimal places where necessary.)
A) $4.50
B) $15.00
C) $16.67
D) $21.17

Question

Quizplus · Accepted Answer

Variable cost per unit is the cost that changes with the output level. Here, the cost of material for derbies is a variable cost, which is given as $4.50 per unit. The wages paid to employees are fixed costs because they do not change with the production level. Therefore, they are not included in the variable cost per unit calculation. Hence, the variable cost per derby is $4.50.

Dapper Hat Makers Is in the Business of Designing and Producing