Papillon Co. has determined the following per unit amounts: Direct materials $30 Fixed selling and administrative $60 Direct labor 36 Variable overhead 24 Desired ROI 33 Variable selling and administrative 15 Fixed overhead 45 The cost base using the variable-cost approach is A. $90. B. $135. C. $195. D. $105.

Correct answer is $123 using the variable-cost approach.

Explanation:

Variable-cost approach

Variable costing is a methodology that only assigns variable costs to inventory. This approach means that all overhead costs are charged to expense in the period incurred, while direct materials and variable overhead costs are assigned to inventory

Target selling price = Variable production cost per unit+Desired ROI per unit

= (30+36+24) + 33

Target selling price = $123

The correct answer is A.

Explanation:

Giving the following information:

Direct materials = $30

Direct labor = $36

Variable overhead = $24

Under the variable costing method, the unit product cost is calculated using the direct material, direct labor, and unitary variable overhead.

Unitary product cost = 30 + 36 + 24 = $90