b. Total fixed cost are $49885
<h3>What is fixed cost of product ?</h3>
Sometimes production of a product may increase or decrease, but the cost which do not change with the change of output is called fixed cost of the product.
<h3>What is the total fixed cost ?</h3>
Highest monthly total cost = $83800
Highest monthly production units = 3500 desks
Lowest monthly total cost = $61900
Lowset monthly production units = 1240 desks
So, variable cost per unit = (Highest cost-lower cost)/(highest production units-lowest production units)
= ($83800-$61900)/(3500-1240)
= $21900/2260
= $9.7
∴ Total fixed costs=Highest monthly total cost-(highest production units×variable cost per unit)
= $83800-(3500×$9.7)
= $83800-$33950
= $49850
Nearest value is $49885, whch is the correct one.
Learn more about fixed cost here:
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