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? Assume that this level of activity is within the relevant range. a) $963,480 b) $977,244 c) $971,919 d) $970,362

Answer 1

Answer: C) $971,919

Step-by-step explanation:

7000 units generates: $590,730 variable + $372,750 fixed

Fixed cost does not change according to the number of units, it's independent, this way it will be the same for 7100 units

The variable cost will change. First, let's find out the cost per unit:

590,730/7000 = 84.39 per unit

For 7100 = 84.39*7100 = 599169

This way, the total cost for 7100 units is

372,750 + 599,169 = 971,919