Question

South Coast Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2018 operations. Sales (5,500 microwave ovens) $5,500,000 Cost of goods sold 962,500 Store manager's salary per year 150,000 Operating costs per year 220,000 Advertising and promotion per year 18,960 Commissions (3.2% of sales) 176,000 What was the variable cost per unit sold for 2018? O a $207.00 b. $175.00 O c. $277.72 d. $32.00

Answer 1

Part 1

Number of units sold = 5,500

Cost of goods sold = $962,500

Sales = $5,500,000

Sales commission = 3.2% of sales

= 5,500,000 x 3.2%

= $176,000

Cost of goods sold per unit = Cost of goods sold/ Number of units sold

= 962,500/5,500

= $175

sales commission per unit = Sales commission/ Number of units sold

= 176,500/5,500

= $32

Variable cost per unit = Cost of goods sold per unit+ sales commission per unit

= 175+32

= $207

Correct option is a.

Part 2

Store manager salary per year = $150,000

Operating cost per year = $220,000

Advertising and promotion per year = $18,960

Total fixed cost = Store manager salary per year+ Operating cost per year+ Advertising and promotion per year

= 150,000+220,000+18,960

= $388,960

Correct option is c.

Part 3

total cost for 8,900 units = Number of units x Variable cost per unit + Total fixed cost

= 8,900 x 207+ 388,960

= 1,842,300+388,960

= $2,231,260

Correct option is c.

Kindly comment if you need further assistance.

Thanks‼!