Jansen Inc.currently produces and sells 12 000 units per year with the following cost data:
$\begin{array}{ll}
\text { Variable costs } & \$ 10 \text { per unit } \
\text { Fixed costs } & \$ 30000
\end{array}$
Next year,Jansen plans to increase its advertising budget,which will increase fixed costs by 5 per cent.With increased advertising,the company expects the number of units produced and sold to increase by 8 per cent.What are budgeted total costs expected to be next year?
A) $151 500
B) $159 600
C) $161 100
D) $166 080

Question

Jansen Inc.currently produces and sells 12 000 units per year with the following cost data:
$\begin{array}{ll}
\text { Variable costs } & \$ 10 \text { per unit } \
\text { Fixed costs } & \$ 30000
\end{array}$ 
Next year,Jansen plans to increase its advertising budget,which will increase fixed costs by 5 per cent.With increased advertising,the company expects the number of units produced and sold to increase by 8 per cent.What are budgeted total costs expected to be next year?
A) $151 500
B) $159 600
C) $161 100
D) $166 080

Quizplus · Accepted Answer

Current total cost per unit = $86,400/12,000 units = $7.20 per unit

Total cost per unit for next year with 5% increase in fixed costs = $7.20 x 1.05 = $7.56 per unit

Expected increase in units sold = 12,000 units x 8% = 960 units

Budgeted total costs for next year = ($7.56 per unit x 12,960 units) + $86,400 fixed costs = $161,100

Therefore, the correct answer is C ($161,100).

Jansen Inc Variable costs $10 per unit Fixed costs $30000\begin{array}{ll}\text { Variable costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 30000\end{array} Variable costs Fixed costs ​$10 per unit $30000​

Jansen Inc $\begin{array}{ll}\text { Variable costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 30000\end{array}$