During its first year of operations, Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $14,000. General, selling, and administrative expenses were $16,000. The company produced 5,000 units and sold 4,000 units for $30.00 a unit. The average cost to produce one unit is which of the following amounts?

a. $20.00

b. $16.00

c. $18.40

d. $25.00

The correct answer is A.

Explanation:

ing the following information:

During its first year of operations, Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $14,000. General, selling, and administrative expenses were $16,000. The company produced 5,000 units.

Average cost = (direct material + direct labor + allocated factory overhead) / Q

Average cost = (50,000 + 36,000 + 14,000) / 5,000 = 20