During its first year of operations, Connor Company paid $46,750 for direct materials and $19,500 in wages for production workers. Lease payments and utilities on the production facilities amounted to $8,500. General, selling, and administrative expenses were $9,500. The company produced 6,500 units and sold 5,500 units for $16.50 a unit. The average cost to produce one unit is which of the following amounts? a. $11.69

b. $10.10

c. $8.15

d. $12.56

The average cost to produce one unit is $11.5

Explanation:

Total costs to produce 6,500 units of the company are calculated by following formula:

Total costs = Direct materials cost + Labor cost + Lease payments and utilities on the production facilities = $46,750 + $19,500 + $8,500 = $74,750

The company produced 6,500 units. The average cost to produce one unit = Total costs/6,500 = $74,750/6.500 = $11.5

Note: General, selling, and administrative expenses are not the cost to produce the product.