Question

Chrystal Company incurred the following costs for the months of January and February: Type of Cost January February Insurance $ 7,000 $ 7,000 Utilities 2,600 3,800 Depreciation 2,000 2,000 Materials 5,000 8,000 Assume that output was 1,000 units in January and 3,000 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $2,000. What was the variable rate per unit of output for utilities cost

Answer 1

Answer:

$0.6 per unit

Explanation:

The computation of the variable rate per unit of output is shown below:

But before that first we have to determine the variable cost which is

= Total utilities cost - fixed cost

= $2,600 - $2,000

= $600

And the number of units produced is 1,000 units

So, the  variable rate per unit of output for utilities cost is

= $600 ÷ 1,000 units

= $0.6 per unit