Question

Total fixed costs for Taylor Incorporated are $260,000. Total costs, including both fixed and variable, are $500,000 if 156,000 units are produced. The variable cost per unit is
A) $4.87/unit.
B) $1.54/unit.
C) $3.21/unit.
D) $1.67/unit.

Answer 1

Answer:

B) $1.54/unit.

Explanation:

Let's look at what we have;

Total Cost = $ 500,000 ;                                                                           Fixed Cost = $ 260,000

Therefore, the Variable Cost will be = $500,000 - $260,000

= $ 240,000

Number of Units = 156,000 Units

Variable cost per unit = Total Variable Cost / Number of Units

= $ 240,000/ 156,000 Units

= $ 1.538 Per Unit

If we round it of to two decimal places =

The correct answer is B. $ 1.54 / Unit.