Question

At an activity level of 8,800 units, Pember Corporation's total variable cost is $146,520, and its total fixed cost is $219,296. For the activity level of 8,900 units, compute the following values.

a) The total variable cost
b) The total cost
c) The average variable cost per unit
d) The average fixed cost per unit
e) The average total cost per unit

Answer 1

To calculate the total variable cost at an activity level of 8,900 units, divide the total variable cost at the given activity level by the activity level. To calculate the total cost, add the total fixed cost to the total variable cost. The average variable cost per unit is obtained by dividing the total variable cost by the activity level. The average fixed cost per unit is obtained by dividing the total fixed cost by the activity level. The average total cost per unit is obtained by dividing the total cost by the activity level.

Step-by-step explanation:

To calculate the total variable cost at an activity level of 8,900 units, we use the formula:

Total Variable Cost = Variable Cost per Unit x Activity Level

We can obtain the variable cost per unit by dividing the total variable cost at the given activity level by the activity level:

Variable Cost per Unit = Total Variable Cost / Activity Level

To calculate the total cost, we add the total fixed cost to the total variable cost:

Total Cost = Total Fixed Cost + Total Variable Cost

The average variable cost per unit is obtained by dividing the total variable cost by the activity level:

Average Variable Cost per Unit = Total Variable Cost / Activity Level

The average fixed cost per unit is obtained by dividing the total fixed cost by the activity level:

Average Fixed Cost per Unit = Total Fixed Cost / Activity Level

The average total cost per unit is obtained by dividing the total cost by the activity level:

Average Total Cost per Unit = Total Cost / Activity Level