Question

Burruss Company developed a static budget at the beginning of the company's period bases on an expected volume of 8,000 units:Revenue $4.00 per unitVariable costs $1.50 per unitContribution margin $2.50 per unit Fixed costs $2.00Net income $0.50If actual production totals 10,000 units which is within the relevant range, the flexible budget would show fixed costs of:

Answer 1

Total fixed cost $16,000

unit fixed cost for 10,000 units $1.60

Step-by-step explanation:

the budget was made for 8,000 units

so the 2.00 dollars for fixed cost will be based on a production for 8,000 units

total fixed cost: 8,000 budgeted units x $2 per unit = 16,000

This is the level of fixed cost.

For 10,000 units the total fixed cost should be the same.

and for units it will be total cost / units of production

16,000 / 10,000 = 1.6

On unit-level it will drop by 40 cent to $1.60 from $2.00