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A company has established the following information for the costs and revenues at an activity level of 500 units..
Direct materials $2500
Direct labour $5000
Production overheads $1000
Selling costs $1250
——————–
Total cost. $9750
Sales revenue. $17500
———————
Profit. $7750
——————–20% of selling costs and 50% of the production overheads are fixed over all level of activity.
What would be the profit at an activity level of 1000 units?
A $15500 B $16250 C $16500 D $17750
I always get the answer a or c.. Help plz..
direct material : 2500/500 * 1000 = 5000
direct labour : 5000/500 * 1000 = 10000
production overhead = 1000*50% + (1000*50% / 500 * 1000 ) = 1500
selling cost = 1250*20% + (1250*80%/500 * 1000) = 2250
cost per unit = 17500 / 500 = 35
so SALE REVENUE for 1000 unit = 35 * 1000 = 35000
LESS all cost : 35000 – 5000 – 10000 – 1500 – 2250 = 16250
i think the answer is B 😀
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