Haras Corporation is a wholesaler that sells a single product. Management has pr

Question

Haras 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 $151.30 per unit.

Sales volume (units)

6,500

7,500

Cost of sales

$379,600

$438,000

Selling and administrative costs

$500,500

$525,000

  
The best estimate of the total variable cost per unit is:

$128.40

$58.40

$82.90

$135.40

Sales volume (units)

6,500

7,500

Cost of sales

$379,600

$438,000

Selling and administrative costs

$500,500

$525,000

Explanation / Answer

Variable costs per unit = ($438,000-$379,600)÷(7,500-6,500)+($525,000-$500,500)÷(7,500-6,500)

Variable costs per unit = $82.90

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