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A project with a life of one year has earnings before interest and taxes of $5,750, fixed costs of $50,000, a selling price of $13 a unit, and a sales quantity of 11,500 units. Depreciation is $7,500. What is the variable cost per unit

Respuesta :

$7.50 is the variable cost per unit.

Given selling price is $13 a unit, sales quantity 11,500 units, depreciation is $7,500, EBIT $5,750 and fixed cost of $50,000.

Variable cost is to be computed.

The formula to compute the EBIT is given below:

EBIT = [Units * (Selling price - Variable cost per unit)] - Fixed costs - Depreciation

$5,750 = [11,500 * ($13 - Variable cost per unit)] - $50,000 - $7,500

$5,750 = $149,500 - 11,500Variable cost per unit - $50,000 - $7,500

11,500Variable cost per unit = $149,500 - $50,000 - $7,500 - $5,750

11,500 Variable cost per unit = $86,250

                                             = $86,250 / 11,500

                                              = $7.50

Therefore, the variable sot per unit is $7.50.

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