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An organization has the following total costs at three activity levels:
Activity levels (unit) 12,000 16,000 22,000
Total costs 105,000 135,000 170,000
Variable cost per unit is constant within this range of activity, but there is a step up of 10% in total fixed costs when the activity level is exceeding 17,500 units.
What is the total cost at the activity of 20,000 units?
a.$163,500
b.$165,000
c.$166,500
d.$176,250Please read again my comments on your previous post and do not simply set test questions!
Using high low on activity levels of 12,000 and 16,000, the variable cost per unit = (135000 – 105000) / (16000 – 12000) = $7.50 per unit.
Since activity levels of 20,000 and 22,000 both exceed the 17500 level, the total cost for 20,000 units will be 170,000 – (2,000 x 7.50) = $155,000
(You have either mistyped something in the question, or there is an error in the book you are using)
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