Question

Bolman, 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 $800,000 and the total cost per unit manufactured totaled $11. On the basis of this information, how much cost would the firm anticipate at an activity level of 202,000 units?

a. $1,608,00
b. $2,200,00
c. $2,214,000
d. $2,222,000

Answer 1

The firm anticipate at an activity level of 202,000 units, total cost will be: c. $2,214,000

Step-by-step explanation:

When 200,000 units were produced, fixed manufacturing costs per unit:

$800,000/200,000 = $4

The total cost per unit manufactured totaled $11,

Variable costs per unit = $11 - $4 = $7

The firm anticipate at an activity level of 202,000 units,

Variable costs = Variable costs per unit x 202,000 = $7 x 202,000 = $1,414,000

Fixed costs = $800,000 (not change when the number of units produced change)

Total cost = Variable costs + Fixed costs = $1,414,000 + $800,000 = $2,214,000