Lock Division of Morgantown Corp. sells 80,000 units of part Z-25 to the outside market. Part Z-25 sells for $40, has a variable
1 answer:
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Answer:
increased in budget = $98000
correct option is A $98000
Explanation:
given data
produce = 20,000 units per month
variable costs = $392,000
fixed costs = $242,000
increases production = 25,000 units
to find out
how much will they have to increase their budget
solution
we get here total cost or present budget that is
total cost = variable cost + fixed cost
total cost = $392000 + $242000
total cost = $634000
and
variable cost per unit will be here
variable cost per unit =
variable cost per unit =
variable cost per unit = 19.6
and
variable cost for increased production = increases production × variable cost per unit
variable cost for increased production = 25000 × 19.6
variable cost for increased production = 490000
and
total cost of increased production = fixed cost + variable cost for increased production
total cost of increased production = $242000 + $490000
total cost of increased production = $732000
and
increased in budget = $732000 - $634000
increased in budget = $98000
correct option is A $98000