Callander Corporation is a wholesaler that sells a single product. Management ha

Question

Callander 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 $169.60 per unit.

  Sales volume (units)

7,800

8,800

  Cost of sales

$610,740

$689,040

  Selling and administrative costs

$432,000

$444,600

The best estimate of the total monthly fixed cost is:

$1,088,190

$1,042,740

$333,720

$1,133,640

Callander 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 $169.60 per unit.

Explanation / Answer

For Cost of Sales Variable Cost per unit = (Difference In Cost Of Sales) / (Difference of Activity Units)

= (689040 - 610740) / ( 8800- 7800) = 78.30 per unit

At 7800 units, total cost = 78.30 * 7800 = 610740

Hence entire cost of sales are variable in nature

Now For Selling and Admin Overhead Variable Cost per unit = ( 444600 - 432000) / ( 8800 - 7800) = 12.60

Total variable Selling And Admin = 12.60 * 7800 = 98280

Fixed Cost = 610740 - 98280 = 333720

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