Answer:
TC = $971,919
Step-by-step explanation:
Given complete question is as follows:
" Cooke Corporation reports that at an activity level of 7,000 units, the total variable cost is $590,730, and the total fixed cost is $372,750.
What would be the total cost, both fixed and variable, at an activity level of 7,100 units? Assume that this level of activity is within the relevant range."
Solution:
- The total cost (TC) is the sum of the fixed cost (FC) and variable cost (VC):
TC = FC + VC
- The fixed cost remains constant at every unit level i.e [email protected],000 = [email protected],100 = $372,750.
- The variable cost VC is a linear function of number of units. The marginal variable cost (MVC) is:
MVC = VC / numbe of units
MVC = 590,730 / 7000
MVC = $84.39/units
- The VC cost @7,100 units is as follows:
[email protected],100 = [email protected],000 + MVC*( 7,100 - 7,000)
[email protected],100 = $590,730 + $84.39/units*( 100 )
[email protected],100 = $590,730 + $8439
[email protected],100 = $599,169
- The total cost for 7,100 units is:
TC = FC + VC
TC = $372,750 + $599,169
TC = $971,919
