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A company has the following costs at three activity levels.
Activity 60000 72000
Total cost 960000 1104000
The fixed cost is constant over this range of activity, but there is a reduction in the variable cost per unit by 10% when the activity level exceeds 15,000 units. This reduction applies to all units.
What is the expected total cost when the activity level is 14,000 units?
A $131,800
B $132,400
C $136,000
D $138,000
correct answer is Dcan some plz explain?
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- Replies: 3
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I just tried to solve this but I couldn’t. I think the numbers are incorrect, however if they are correct, I cannot explain it.
Good luck,
B.- Topics: 0
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i can solve this problem as………………………1) u typed wrong activity level as 60000 and 72000 but if it is as 6000 and 7200 then i can explain this step by step……………………concentrate here……………
1)identify thehighest and lowest activity level …………………high is 7200 and low is 6000
2)now find v.c/unit wid the formula as=cost at high activity level -cost at low activity level and divide this wid…high activity level -low activity level
so the v.c/unit will be showed as……….1104000-960000=144000 and divide this wid this,,,,,,,,,7200-6000=1200/…………..144000 divide 1200=120 v.c/unit
t.v.c=v.c/unit x highest or lowest activity level(depends on u …….that u will high or low)i will high………………
t.v.c=120×7200=864000now f.c=t.c-t.v.c
f.c=(highest cost)110400-864000=240000so tc is equal to f.c+t.v.c
t.c=240000+864000=1104000we find these at 7200 activity level but we need to find at 14000
so t.c at 14000:::::::::::::::
t.c=f.c+(v.c/unit x no. of units find)
t.c=240000+ (120 x 14000)
t.c=240000+1680000
t.c=1920000…………………- Topics: 0
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but if units exceed from 15000 units then v.c/unit will decrease asssss then v.c/unit which is 120 x 10/100==108
now again f.c+(v.c/unit x units find)
t.c=240000+(108 x 14000)
t.=240000+1512000
t.c=1752000so i explained thanks…………..
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