Question

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?

Answer 1

Answer:

Total cost would be $971,919

Explanation:

Fixed cost does not change with a variation in activity level, no matter how many units are produced, the cost remains the same, therefore, total fixed cost (F) is still $372,750.

As for the variable cost (V), a cost per unit (C) should be defined as follows:

$C =\frac{V}{units} \\C =\frac{590,730}{7,000} \\C= 84.39$

Applying the same logic, the new variable cost can be obtained by multiplying the cost per unit by the increased number of unities and then added to the fixed cost to find the total cost (T)

$T = 7,100*C +F\\T = 7,100*84.39 +372,750\\\\T= 971,919$

Total cost would be $971,919 at an activity level of 7,100 units.