Question

A firm is reviewing a project with labor cost of $8.60 per unit, raw materials cost of $24.85 a unit, and fixed costs of $11,000 a month. Sales are projected at 10,600 units over the 3-month life of the project. What are the total variable costs of the project?

$343,570
$263,410
$354,570
$365,570
$182,785

Answer 1

The total variable costs of the project are calculated by adding the labor cost per unit to the raw material cost per unit, and then multiply this variable cost per unit by the total units sold. The total comes to $354,570.

Step-by-step explanation:

The question is asking us to calculate the total variable costs of a firm's project over a three-month period. To find the total variable costs, we have to multiply the cost per unit of labor and raw materials by the total number of units expected to be sold.

First, we calculate the variable cost per unit by adding the labor cost of $8.60 to the raw material cost of $24.85, which gives us $33.45 as the variable cost per unit. Then, we multiply this number by the projected sales of 10,600 units to get the total variable costs.

Total Variable Costs = $33.45 (variable cost per unit) × 10,600 (units sold) = $354,570.

Therefore, the total variable costs of the project are $354,570.