Question

Cooke Corporation reports that at an activity level of 7,000 units, the total variable cost is $590,730, and the total fixed cost is $372,750. What would be the total cost, both fixed and variable, at an activity level of 7,100 units? Assume that this level of activity is within the relevant range.

Answer 1

$971,919

Step-by-step explanation:

Given:

For activity level = 7,000 units

Total variable cost = $590,730

Total fixed cost = $372,750

Now,

Variable cost per unit =
`\frac{\textup{Total variable cost }}{\textup{Activity level}}`

or

Variable cost per unit =
`\frac{\textup{590,730}}{\textup{7,000}}`

or

Variable cost per unit = $84.39

The fixed cost remains the same irrespective of the number of units produced

Therefore,

The total cost for activity level of 7,100 unit

= Total variable cost for 7,100 units + Total fixed cost

= Variable cost per unit × Number of units + Total fixed cost

= ( $84.39 × 7,100 ) + $372,750

= $599,169 + $372,750

= $971,919