ompany X and company Z are planning to merge their business into one and are seeking regulatory approval. What is the most likel
1 answer:
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Answer: Option (B) is correct.
Explanation:
Given that,
High level of activity = 120,000 units
Low level of activity = 40,000 units
Utility costs = $60,000 in June
Utility costs = $156,000 in November
Variable cost per unit:
=
=
= $1.2 per unit
Fixed cost element:
= Total cost at high level - variable cost at high level
= $156,000 - $1.20 x 120,000 units
= $156,000 - $144,000
= $12,000
Utility cost for a month:
= Fixed cost per month + $1.20 variable cost per unit at 80,000 units
= $12,000 + $1.20 x 80,000 units
= $108,000