Question:

How to calculate Variable cost per unit if the following information is available?

by  |  earlier

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Raw material $3.00 per unit

Direct labour 1.94 per unit

Sales commissions 0.96 per unit

Shipping expense 0.35 per unit

Variable overhead 0.58 per unit

Indirect materials 2,000

Administrative salaries 35,000

Utilities 21,000

Rent 16,000

Miscellaneous costs 3,000

Insurance 7,000

Advertising expense 120,000 10%

Amortization 2,400

Shipping expense 10,000

Marketing report 2,000

Capital expenditure (year 1) 40,000

Upgrade (year 4) 6,000

Discount rate 9%

Tax rate 38%

CCA rate, machinery 20%

Sales (in units) 55,000 35,000 20,000

Selling price $8.00 $13.00 $17.00

Selling Price

Variable cost per unit

Contribution margin

Units

Total contribution margin

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2 ANSWERS


  1. Variable costs vary with the volume of production.  So seems to me these are the variable costs:

    raw materials = 3.00

    direct labor      = 1.94

    shipping and sales  = .35 + .96

    variable overhead   = .58

    = 6.83 per unit.


  2. Variable Cost per unit = Raw Material cost per unit+ Direct labour per unit+ Variable overhead per unit.

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