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A manufacturer has determined that at high levels of production, due to the need for extra supervision, their fixed costs
increase by $30,000 for every 10,000 units of production. During the last two months it has experienced the following total
costs:
Production Total costs ($000)
Month 1 180,000 11,120
Month 2 200,000 11,800
In Month 3 production is expected to be 205,000 units. What is the total forecast cost for Month 3?Hi there & thanks for your question.
There is something missing which is when the stepped costs – start to apply ( the increment is 10,000 units – but at what point does this kick in? ( I cant be certain from this info)Presumably you have an answer in your text book or exam kit – so if you can share this & tell me which part or aspect you cant follow or need explaining that would help?
Kind Regards
Cath
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