Question

Based on predicted production of 23,000 units, a company anticipates $414,000 of fixed costs and $362,250 of variable costs. The flexible budget amounts of fixed and variable costs for 21,000 units are (Do not round intermediate calculations): Multiple Choice $330,750 fixed and $414,000 variable. $414,000 fixed and $330,750 variable. $414,000 fixed and $362,250 variable. $378,000 fixed and $330,750 variable. $378,000 fixed and $362,250 variable.

Answer 1

Answer:

The correct option is a. the variable cost is $330,750 and fixed cost is $414,000.

Explanation:

For computing the correct figures of variable cost and fixed cost for 21,000 units, first we have to calculate the variable cost per unit.

So,

Variable cost per unit = Total variable cost ÷ Number of units

                                    = $362,250 ÷ 23,000

                                    = $15.75 per unit

SO, variable cost for 21,000 units = Number of units × per unit price

                                                        = 21,000 × $15.75

                                                        = $330,750

Hence, the variable cost for 21,000 units is $330,750

Since the fixed cost remained fixed whether production level is increased or not. So, fixed cost would be $414,000

Therefore, the correct option is a. the variable cost is $330,750 and fixed cost is $414,000.