Question

Adens Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows:
Average
Cost per Unit
Direct materials $ 6.25
Direct labor $ 2.80
Variable manufacturing overhead $ 1.55
Fixed manufacturing overhead $ 2.40
Fixed selling expense $ 0.50
Fixed administrative expense $ 0.40
Sales commissions $ 1.00
Variable administrative expense $ 0.50
If 5,000 units are sold, the variable cost per unit sold is closest to:

A. $13.00
B. $10.60
C. $12.10
D. $15.40

Answer 1

Answer:

C. $12.10

Explanation:

The variable cost per unit is constant across the relevant range:

Direct materials $ 6.25

Direct labor $ 2.80

Variable manufacturing overhead $ 1.55

Variable Manufacturing cost:    10.6

Sales commissions $ 1.00

Variable administrative expense $ 0.50

Other Variable Cost  1.50

Total variable cost: 10.6 + 1.5 = 12.10