Question

Slappy Corporation leases its corporate headquarters building. This lease cost is fixed with respect to the company's sales volume. In a recent month in which the sales volume was 20,000 units, the lease cost was $482,000. To the nearest whole dollar, what should be the total lease cost at a sales volume of 16,900 units in a month? (Assume that this sales volume is within the relevant range.)

Answer 1

$482,000

Step-by-step explanation:

The computation of the total lease cost is shown below:

For 16,900 units, the lease cost would be

= Lease cost × sales volume ÷ recent sales volume

= $482,000 × 16,900 units ÷ 20,000 units

= $407,290

This would be the answer but the least cost if fixed whether sales volume is increased or not . So, the total lease cost would remain unchanged i.e $482,000