Question

Variable costs per unit are as follows:

Raw materials: $2.15

Direct labour: $1.45

Fixed costs are $5,000 per month.

If the company produces 4,000 units in the month of March, Calculate its total costs.

Answer 1

Answer)

Calculation total costs for the month of March

Total cost = Total Variable cost + Fixed cost

                  = $ 14,400 + $ 5,000

                  =$ 19,400         

Therefore total cost of producing 4,000 units is $ 19,400.

Working Note:

Calculation of Total variable cost

Total Variable cost = Total Raw material cost + Total direct labor cost

                                   = (Raw material cost per unit X number of units produced) + (Direct Labor cost per unit X number of units produced)

                                       = ($ 2.15 X 4,000 units) + ($ 1.45 X 4,000 units)

                                       = $ 8,600 + $ 5,800

                                        = $ 14,400