Callis Corporation is a wholesaler that sells a single product. Management has p

Question

Callis Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $209.90 per unit.

  
The best estimate of the total monthly fixed cost is:

$1,364,900

$345,700

$1,410,860

$1,558,340

Callis Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $209.90 per unit.

Explanation / Answer

Variable cost per unit and Total Fixed Cost do not change with change in units.

cost of sales ia a variable cost since cost per unit=[(744800/9800)=$76 per unit ] does not change with change in units.

For Selling and administrative costs;

Variable cost per unit=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)

=(672180-620100)/(11660-9800)=$28 per unit

Hence Total fixed cost=672180-(28*11660)

which is equal to

=$345,700.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.