An apparel manufacturing plant has estimated the variable cost to be $4.50 per unit. Fixed costs are $500,000 per year. Forty percent of its business is with one preferred customer and the customer is charged at cost. The remaining 60% of the business is with several different customers who are charged $40 per unit.
If 150,000 total units are sold in a year, compute the unit cost per item.
$7.83
$11.23
$3.33
$23.92