Asked by Ninh Thi Thuy Trang on May 30, 2024
Verified
Timchak Corporation reports that at an activity level of 9,900 units, its total variable cost is $919,116 and its total fixed cost is $259,974. What would be the total cost, both fixed and variable, at an activity level of 10,100 units? Assume that this level of activity is within the relevant range. (Round intermediate calculations to 2 decimal places.)
A) $1,197,658
B) $1,191,000
C) $1,179,090
D) $1,202,910
Relevant Range
The level of activity or volume over which the specific cost assumptions (fixed and variable costs) are valid.
Total Variable Cost
The sum of all costs that vary directly with the level of production or output.
Total Fixed Cost
The sum of all costs that remain constant regardless of the level of production or business activity.
- Contrast between fixed expenses and variable expenses, and calculate the cumulative cost across different activity intensities.
- Digest and utilize cost formulae to predict the financial outlay across different volumes of production.
Verified Answer
SF
Steffi FernandesJun 02, 2024
Final Answer :
A
Explanation :
First, we need to calculate the variable cost per unit:
Variable cost per unit = Total Variable Cost / Activity Level
Variable cost per unit = $919,116 / 9,900
Variable cost per unit = $92.87
Next, we can use the cost formula to calculate the total cost at an activity level of 10,100 units:
Total Cost = Total Fixed Cost + (Variable Cost per unit x Activity Level)
Total Cost = $259,974 + ($92.87 x 10,100)
Total Cost = $259,974 + $939,887
Total Cost = $1,199,861
Rounding this to the nearest dollar gives us a total cost of $1,197,658, which is option A.
Variable cost per unit = Total Variable Cost / Activity Level
Variable cost per unit = $919,116 / 9,900
Variable cost per unit = $92.87
Next, we can use the cost formula to calculate the total cost at an activity level of 10,100 units:
Total Cost = Total Fixed Cost + (Variable Cost per unit x Activity Level)
Total Cost = $259,974 + ($92.87 x 10,100)
Total Cost = $259,974 + $939,887
Total Cost = $1,199,861
Rounding this to the nearest dollar gives us a total cost of $1,197,658, which is option A.
Learning Objectives
- Contrast between fixed expenses and variable expenses, and calculate the cumulative cost across different activity intensities.
- Digest and utilize cost formulae to predict the financial outlay across different volumes of production.