Question

TB MC Qu. 1-141 Paolucci Corporation's relevant ...

Paolucci Corporation's relevant range of activity is 7,800 units to 16,000 units. When it produces and sells 11,900 units, its average costs per unit are as follows:

AverageCost per UnitDirect materials$7.00 Direct labor$3.90 Variable manufacturing overhead$1.90 Fixed manufacturing overhead$3.20 Fixed selling expense$1.20 Fixed administrative expense$0.90 Sales commissions$1.15 Variable administrative expense$0.80

If 10,900 units are sold, the variable cost per unit sold is closest to:

Multiple Choice

Answer 1

The variable cost per unit sold by Paolucci Corporation when 10,900 units are sold is $14.75. This is calculated by adding all variable costs per unit and dividing by the number of units sold.

Step-by-step explanation:

The question involves calculating the variable cost per unit sold by Paolucci Corporation when 10,900 units are purchased. The relevant details provided, including direct materials, direct labor, and variable manufacturing overhead, are required for the computation. Additionally, sales commissions and variable administrative expense per unit are also considered variable costs.

To calculate the variable cost per unit:

• Determine all the variable costs.
• Add them together to get the total variable cost.
• Divide the combined total by the number of units sold to determine the variable cost per unit.

For Paolucci Corporation, we simply add the average costs that are variable in nature:

Direct materials: $7.00

Direct labor: $3.90

Variable manufacturing overhead: $1.90

Sales commissions: $1.15

Variable administrative expense: $0.80

Adding these up gives us a total variable cost per unit of:

$7.00 + $3.90 + $1.90 + $1.15 + $0.80 = $14.75

Therefore, the variable cost per unit sold when 10,900 units are sold is $14.75.