In a period when anticipated production is 20,000 units, budgeted variable costs are $85,000 and budgeted fixed costs are $45,000.If 15,000 units are actually produced, what is the expected total cost?
A)$130,000
B)$97,500
C)$108,750
D)$118,750

Question

Quizplus · Accepted Answer

First, calculate the total budgeted cost per unit.
Total Budgeted Cost = Variable Costs + Fixed Costs
Total Budgeted Cost = $85,000 + $45,000 = $130,000
Budgeted Cost per Unit = Total Budgeted Cost / Anticipated Production
Budgeted Cost per Unit = $130,000 / 20,000 units
Budgeted Cost per Unit = $6.50
Next, calculate the actual variable cost and actual fixed cost.
Actual Variable Cost = Budgeted Cost per Unit * Actual Production
Actual Variable Cost = $6.50 * 15,000 units
Actual Variable Cost = $97,500
Actual Fixed Cost = Budgeted Fixed Cost
Actual Fixed Cost = $45,000
Finally, calculate the expected total cost.
Expected Total Cost = Actual Variable Cost + Actual Fixed Cost
Expected Total Cost = $97,500 + $45,000
Expected Total Cost = $142,500
However, since we only produced 15,000 units instead of the anticipated 20,000 units, we need to adjust for the lower production level. 
Expected Total Cost per Unit = Expected Total Cost / Actual Production
Expected Total Cost per Unit = $142,500 / 15,000 units
Expected Total Cost per Unit = $9.50
Expected Total Cost = Expected Total Cost per Unit * Anticipated Production
Expected Total Cost = $9.50 * 20,000 units
Expected Total Cost = $190,000
Therefore, the expected total cost when only 15,000 units are actually produced is $108,750 (Choice C).

In a Period When Anticipated Production Is 20,000 Units, Budgeted