The Total Variable Cost per unit is given as:= $115 per unit
The total variable cost is the sum of all variable costs associated with each individual product that has been produced.
It is computed by multiplying the cost to make one unit of your product by the number of products was produced.
Hence:
Total Variable cost per unit = Direct materials +Direct labor + Production supplies + Sales commission + Packaging
TVC = ($450,000 / 18000) + (($756,000 /18000) + ($486,000 / 18000) + ($126,000 / 18000) + ($252,000 / 18000)
TVC = $25 + $42 + $27 + $7 + $14
TVC = $115 per unit
Total fixed costs (TFC) is the total of all consistent, non-variable expenses a company must pay during the course of it's operations.
Hence,
Total fixed costs (TFC) = Plant manager salary + Advertising + Administrative salaries + Depreciation - Office equipment + Insurance + office rent
TFC = $250,000 + $100,000 + $300,000 + $270,000 + $240,000 + $250,000
TFC = $1,410,000
The total income or revenue from 16,000 units is given as:
Contribution margin - Fixed costs
TI (16,000) = ($206 - $115) * 16000 - $1,410,000
TI = $46,000
Drawing form the formula above, we have:
Contribution margin - Fixed costs
TI = ($206 - $115) * 20000 - $1,410,000
TI = $410,000
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