Question

Panther Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Direct materials Average Cost per Unit $ 6.6 $ 4.65 $ 2.5 $ 2.8 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense 0.7 0.4 $ $ $ $ 0.5 0.45 If 4,000 units are sold, the total variable cost is closest to: $58,800 $47,600 $54,800 $67,000

Answer 1

The total variable cost is calculated as follows:

	$
Direct materials	6.60
Direct labor	4.65
Variable manufacturing overhead	2.50
Sales commissions	0.50
Variable administrative expense	0.45
Variable cost per unit	$14.70

The variable cost = 4000 Units * $14.70

                         = $58,800

So correct answer is option (1) or $58,800