Question

Moung Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:______. 30,000 Hours 40.000 Hours 50.000 Hours Variable costs $135,000 $180,000 $225,000 Fixed costs 720,000 720,000 720.000 Moung's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:_______.(Round calculations to 2 decimals.):
Y = $4.50AH + $700,000.
Y = $180,000 + $17.50AH.
Y = $925,000.
Y = $22.00AH.
Y = $4.50AH + $23.30AH.

Answer 1

Answer: Y = $4.50AH + $700,000.

Explanation:

Based on the options given, I believe you meant that the fixed cost is 700000 and not 720000.

Note that the variable cost per activity hour will be:

= 180000/40000

= 4.50 per AH

Fixed Cost = $700,000

Therefore, using Moung's flexible-budget formula, this will be:

Y = bx + a

Y = $4.50 AH + $700,000