Question

Based on a predicted level of production and sales of 15,000 units, a company anticipates reporting operating income of $22,000 after deducting variable costs of $75,000 and fixed costs of $8,000. Based on this information, the budgeted amounts of fixed and variable costs for 18,000 units would be:

Answer 1

Total variable cost= 90,000

Total fixed costs= 8,000

Total costs= $98,000

Step-by-step explanation:

Giving the following information:

Production of 15,000 units:

Fixed costs= $8,000

Total variable cost= $75,000

We have no reason to believe that the fixed costs will change. If 18,000 units remain in the relevant range, the fixed costs are constant.

We need to calculate the unitary variable cost:

Unitary variable cost= 75,000/15,000= $5

Now, for 18,000 units:

Total variable cost= 5*18,000= 90,000

Total fixed costs= 8,000

Total costs= $98,000