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Calculating Variable Cost

1. A firm is reviewing a project with labor cost of $9.90 per unit, raw materials cost of $22.63 a unit, and fixed costs of $8,000 a month. Sales are projected at 10,000 units over the three-month life of the project. What are the total variable costs of the project?

2. Which of the following statements concerning variable costs is (are) correct?
I. Variable costs minus fixed costs equal marginal costs.
II. Variable costs are equal to zero when production is equal to zero.
III. An increase in variable costs increases the operating cash flow.
II only
III only
I and III only
II and III only
I and II only

Solution Preview

1 --

Labor costs = 9.90 per unit x 10,000 units = 99,000
Raw materials = 22.63 ...

Solution Summary

This solution provides the correct answers with explanations to the two variable cost multiple choice questions presented.