Question

Pedregon Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 6.65 Direct labor $ 3.70 Variable manufacturing overhead $ 1.45 Fixed manufacturing overhead $ 25,900 Sales commissions $ 0.65 Variable administrative expense $ 0.70 Fixed selling and administrative expense $ 4,800 If 7,000 units are sold, the total variable cost is closest to:

Answer 1

$92,050.

Step-by-step explanation:

Given:

Cost per Unit Cost per Period

Direct materials $ 6.65

Direct labor $ 3.70

Variable manufacturing overhead $ 1.45

Fixed manufacturing overhead $ 25,900

Sales commissions $ 0.65

Variable administrative expense $ 0.70

Fixed selling and administrative expense $ 4,800

Therefore, we have:

Total variable cost = ($6.65 + $3.70 + $1.45 + $0.65 + $0.70) * 7,000 = $13.15 * 7,000 = $92,050.

Therefore, the total variable cost is closest to $92,050.

Answer 2

$92,050

Step-by-step explanation:

The total variable cost is the sum of all the costs that are dependent on the level of activity (i.e volume of production and sales). These cost include the sales commission, variable administrative expenses, Variable manufacturing overhead, as well as the direct material and direct labor costs.

Hence total variable cost per unit

= $6.65 + $3.70 + $1.45 + $0.65 + $0.70

= $13.15

Given that the company sold 7000 units, the total variable cost is closest to

= $13.15 * 7000

= $92,050