Question

A company that manufactures cell phones has been given a quarterly operating budget of $951,615.00. The company's quarterly

operating cost consists of two costs: an overhead fixed cost and the manufacturing cost of each cell phone. The company knows
that the overhead fixed cost per quarter is $225,378.00, and the cost to manufacture each cell phone is $58.90.
If the company's quarterly operating costs cannot exceed the quarterly budget, then what is the maximum number of cell phones
that they can manufacture during the quarter?
OA. 19,983
OB
8,504
C. 4,677
OD.
12,330

Answer 1

Answer: D. 12,330 phones

Explanation:

First remove the fixed cost from the operating budget so that the variable cost that can be spent on each phone is known in total:

= 951,615 - 225,378

= $726,237

With each phone costing $58.90, the total number of phones that can be produced is therefore:

= Variable budget / Variable cost per phone

= 726,237 / 58.90

= 12,330 phones