Question

Desperado Corporation's relevant range of activity is 2,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.60 Direct labor $ 3.65 Variable manufacturing overhead $ 1.45 Fixed manufacturing overhead $ 2.80 Fixed selling expense $ 0.70 Fixed administrative expense $ 0.40 Sales commissions $ 0.50 Variable administrative expense $ 0.45 If 4,000 units are sold, the total variable cost is closest to:

Answer 1

Total variable cost= $50,600

Step-by-step explanation:

Giving the following information:

5,000 units:

Direct materials $ 6.60

Direct labor $ 3.65

Variable manufacturing overhead $ 1.45

Sales commissions $ 0.50

Variable administrative expense $ 0.45

Total unitary variable cost= $12.65

Now, for 4,000 units:

Total variable cost= 12.65*4,000

Total variable cost= $50,600