Question

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

Answer 1

$150,000 is fixed and $102,500 is variable

Step-by-step explanation:

Variable cost per unit at 12,000 units:

= Variable cost ÷ No. of units

= $123,000 ÷ 12,000

= $10.25 per unit

Variable cost at flexible budget 10,000 units:

= 10,000 units × $10.25 per unit

= $102,500

Fixed cost remains the same at any point of time,

Therefore, fixed cost for 10,000 units is $150,000.