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

Question

Haram 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 $182.10 per unit.

Sales volume (units) --------- 4,000       5,000

Cost of Sales ----------- $385,200 $481,500

Selling and administrative costs -- $286,400 $310,500

The best estimate of the total variable cost per unit is:
A. $120.40
B. $158.40
C. $167.90
D. $96.30

Answer is A for your convinience. I actually figured out this long ago, but I forgot! please help. Thanks

Explanation / Answer

Cost of sales is fully variable @ $96.30 Selling and administrative costs - partly variable @ $24.10 Hence the total variable cost is $120.40. Increament in selling and administrative cost is $24,100 (310,500 - 286,400) for 1000 (5,000 - 4,000) units Therefore for one unit the variable cost = $24.10.

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