Question

Candle central has $1,440 of total variable expense for a sales level of 600 units and $2,160 of total variable expense for a sales level of 900 units. If candle central sells 500 units, which of the following statements would be true?

a) $1,200
b) $1,440
c) $1,600
d) $1,800

Answer 1

By calculating the variable cost per unit ($2.40) using the provided expenses for 600 and 900 units, we can estimate that the total variable expenses for selling 500 units would be $1,200, not the $1,800 originally stated.

Step-by-step explanation:

The subject in question revolves around the concept of variable expenses in relation to sales levels, which is an important aspect of cost accounting and managerial decision-making in a business context. We know that Candle Central's total variable expenses change with the number of units sold: $1,440 for 600 units and $2,160 for 900 units. Based on the data, we can calculate the variable cost per unit and then estimate the variable expenses incurred when 500 units are sold.

To find the variable cost per unit, we analyze the additional variable expense incurred for the additional 300 units sold. The variable cost per unit can be calculated as the change in total variable expense divided by the change in the number of units sold, which is ($2,160 - $1,440) / (900 - 600) = $720 / 300 = $2.40 per unit. We then multiply the variable cost per unit by the 500 units to estimate the total variable expense for 500 units: 500 units * $2.40 = $1,200.