Question

The following costs are budgeted for Harlow Corporation for next year: The costs above are based on a level of activity of 20,000 units. Assuming that this activity is within the relevant range, what would total cost per unit be for Harlow if the level of activity was only 18,000 units?

Answer 1

$48.50

Step-by-step explanation:

Harlow Corporation

First step is to calculate for Variable cost per unit:

Variable cost per unit =

$270,000 ÷ 20,000 units

= $13.50 per unit

Second step is to calculate for the cost function

Cost function :

Y = $630,000 + $13.50X

Y= $630,000 + $13.50(18,000)

Y=$630,000+$243,000

Y = $873,000

Therefore:

Total cost / number of units = total cost per unit$

Total cost =$873,000

Number of units= 18,000

$873,000 ÷ 18,000

= $48.50

Therefore the total cost per unit is $48.50