Haram 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 $182.10 per unit. The best estimate of the total variable cost per unit is:
A)$120.40
B)$158.40
C)$167.90
D)$96.30

Question

Haram 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 $182.10 per unit.  The best estimate of the total variable cost per unit is:
A)$120.40 
B)$158.40 
C)$167.90 
D)$96.30

Quizplus · Accepted Answer

Variable component of cost of goods sold:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($481,500 - $385,200) F1F1F1S1F1F1F10 (5,000 - 4,000)
Variable cost = $96.30 per unit
Fixed cost:
High units: $481,500 - $96.30 F1F1F1S1F1F1F10 5,000 = $0
Low units: $385,200 - $96.30 F1F1F1S1F1F1F10 4,000 = $0
Variable component of selling and administrative expenses:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($310,500 - $286,400) F1F1F1S1F1F1F10 (5,000 - 4,000)
Variable cost = $24.10 per unit
Fixed cost:
High units: $310,500 - $24.10 F1F1F1S1F1F1F10 5,000 = $190,000
Low units: $286,400 - $24.10 F1F1F1S1F1F1F10 4,000 = $190,000
Total variable cost per unit:
$96.30 + $24.10 = $120.40 per unit
Total fixed cost:
$0 + $190,000 = $190,000

Haram Corporation Is a Wholesaler That Sells a Single Product