Question

During its first year of operations, Beta Company paid $26,310 for direct materials and $18,100 in wages for production workers. Lease payments and utilities on the production facilities amounted to $7,100. General, selling, and administrative expenses were $8,100. The company produced 5,100 units and sold 4,100 units for $15.10 a unit. The average cost to produce one unit is which of the following amounts? (Round your final answer to 2 decimal places.)
$11.69
$10.10
$8.15
$12.56

Answer 1

Answer:

The correct answer is $11.69

Explanation:

This is quite straight forward and it is like regular arithmetic. To calculate the average cost to produce 1 unit, you will need to know the total cost and the total number of units produced.

now Let me outline these items:

Total cost refers to all the costs both direct and indirect incurred during the production process, and these costs are:

$26,310 + $18,100 + $7,100 + $8,100 = $59,610

Therefore total cost of production = $59,610

Total units produced = 5,100

Therefore, $59,610 is needed to produce 5,100 units or written as:

5,100 units = $5,610

∴ 1 unit = $\frac{59610}{5100}$ = 11.688 = $11.69 (to 2 decimal places)