Question

Organize, Inc. has only variable costs and fixed costs. A review of the company's records disclosed that when 200,000 units were produced, fixed manufacturing costs amounted to $1,000,000 and the cost per unit manufactured totaled $14. On the basis of this information, how much cost would the firm anticipate at an activity level of 205,000 units?

Answer 1

$2,845,000

Step-by-step explanation:

Total cost of 200,000 units = 200,000 x 14 = $2,800,000

Fixed Cost = $1,000,000

Variable Cost = $2,800,000 - $1,000,000 = $1,800,000

Varable Cost per unit = $1,800,000/200,000 = $9.00

Therefore, the total cost (C) for 205,000 units is:

`C= \$ 1,000,000 +(205,000 * \$ 9.00)\\C= \$ 2,845,000`

The firm would anticipate a cost of $2,845,000 at an activity level of 205,000 units.