Question

Based on a predicted level of production and sales of 15,000 units, a company anticipates reporting operating income of $22,000 after deducting variable costs of $90,000 and fixed costs of $8,000. Based on this information, the budgeted amounts of fixed and variable costs for 18,000 units would be:_______a.$8,000 of fixed costs and $90,000 of variable costs.b.$8,000 of fixed costs and $102,000 of variable costs.c.$9,600 of fixed costs and $90,000 of variable costs.d.$9,600 of fixed costs and $108,000 of variable costs.e.$8,000 of fixed costs and $108,000 of variable costs.

Answer 1

e.$8,000 of fixed costs and $108,000 of variable costs.

Step-by-step explanation:

Fixed costs don't change with a change in production volume, therefore, fixed costs remain $8,000.

The cost per unit to produce 15,000 units is:

`C =(\$90,000)/(15,000)\\C=\$6/unit`

Assuming a new production volume of 18,000 units, budgeted variable costs are:

`V_c=\$6*18,000= \$108,000`

The budgeted amounts are: e.$8,000 of fixed costs and $108,000 of variable costs.