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27 January, 19:03

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

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  1. 27 January, 22:34
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    The firm anticipate at an activity level of 202,000 units, total cost will be: c. $2,214,000

    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
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