Pacific Company sells only one product for $ 15 per unit, variable production costs are $ 5.00 per unit, and selling and administrative costs are $ 1.60 per unit. Fixed costs for 10 comma 000 units are $ 5 comma 000. The operating income is . A. $ 9.50 per unit B. $ 7.90 per unit C. $ 8.40 per unit D. $ 6.60 per unit

The correct answer is option (B).

Explanation:

According to the given scenario, the given data are as follows:

Selling price per unit = $15

Variable production cost = $5

Selling and administrative costs = $1.60

Fixed cost for 10,000 units = $5000

So, Fixed cost per unit = $5000 / 10,000 = $0.50

Hence, we can calculate the operating income by using following formula:

Operating income = Selling price - ( All cost )

= $15 - ( $5 + $1.60 + $.50 )

= $15 - $7.10

=  $7.90

The operating income per unit is $7.90

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