[thingol]

Hi,

can you please help me with this question?
Thank you

A company has the following costs at 3 activity levels

Units $

5000 180000
8000 240000
11000 276000

The variable cost per unit is constant over this range of activity, but there is a step fixed cost and total fixed costs increase by 20% when the activity level exceeds 7500 units.

Estimate the expected total cost when the activity level is 7000 units.

I have an answer to this question, but I don’t understand the logic.

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