Question

Forever Quilting is a small company that makes quilting kits prices at $120. The costs of the materials that go into each kit total $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $4,500 for the monthly salary of its owner. Forever Quilting unit variable cost for its kits is

Answer 1

$50

Step-by-step explanation:

Variable costs are those cost which changes with the change in activity like sales, production etc. Variable costs includes direct material cost, direct labor cost, variable overhead cost etc.

Variable cost

costs of the materials $45

Assembling cost $5

Total $50

Rent and insurance,heat and electricity, advertising are classified as fixed costs so these costs are not included in the variable cost.