Question

Paolucci Corporation's relevant range of activity is 5,100 units to 11,500 units. When it produces and sells 8,300 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	6.55
Direct labor	$	3.45
Variable manufacturing overhead	$	1.45
Fixed manufacturing overhead	$	3.80
Fixed selling expense	$	1.40
Fixed administrative expense	$	0.95
Sales commissions	$	1.35
Variable administrative expense	$	0.85

If 7,300 units are sold, the variable cost per unit sold is closest to:

Multiple Choice

• $19.80

• $11.45

• $15.25

• $13.65

Answer 1

Solution:

Variable cost per unit = direct materials + direct labor + variable manufacturing overhead + sales commissions + variable administrative expense

= 6.55 + 3.45+ 1.45 + 1.35 + 0.85

= $13.65

Hence last option is correct.