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Q:- Product A is made from materials costing $12/unit of production. The direct wage rate is $14/hour and the direct wages cost is $7/unit. The business has a capacity to produce and sell 1,000 units per week and fixed costs total $8,000 per week.
Variable overheads are absorbed at $18 per direct labour hour.
*What is the total variable cost per units?Please don’t simply set test questions and expect a full answer. You must have an answer in the same book in which you have found the question, and you should therefore ask about whatever in the answer is causing you a problem, and then I will try and explain.
Since the wages cost is $7 per unit, and wages are $14 per hour, then each unit must take 0.5 hours to produce.
Therefore the total variable cost per unit = 12 (materials) + 7 (wages) + (0.5 hours x 18) (var overheads) = $28.
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