Hut Company's variable selling and administrative cost is $48,000 when production is 6,000 units._____ are the variable selling and administrative expenses for 7,000 and 8,000 units, respectively.
A)$48,000 and $48,000
B)$56,000 and $64,000
C)$64,000 and $56,000
D)None of these answers is correct

Question

Quizplus · Accepted Answer

To find the variable selling and administrative expenses for 7,000 and 8,000 units, we need to use the concept of cost behavior. Since the question tells us that the variable selling and administrative cost for 6,000 units is $48,000, we can assume that this cost varies in direct proportion with the number of units produced. In other words, if we produce more units, the variable cost will increase proportionally, and if we produce fewer units, the variable cost will decrease proportionally.

We can use the following formula to calculate the variable selling and administrative expenses for 7,000 and 8,000 units:

Variable selling and administrative expenses = Variable cost per unit x Number of units

Variable cost per unit = Total variable selling and administrative cost / Number of units

Variable cost per unit = $48,000 / 6,000 units = $8

Using this variable cost per unit, we can calculate the variable selling and administrative expenses for 7,000 units and 8,000 units:

Variable selling and administrative expenses for 7,000 units = $8 x 7,000 units = $56,000

Variable selling and administrative expenses for 8,000 units = $8 x 8,000 units = $64,000

Therefore, the correct answer is B) $56,000 and $64,000.

Hut Company's Variable Selling and Administrative Cost Is $48,000 When