Total fixed costs for Green Planes Inc. are $150,000. Total costs, including both fixed and variable, are $600,000 if 140,000 units are produced. The total variable costs at a level of 230,000 units would be (Round any intermediary calculations to the nearest cent.)
A)$273,913
B)$246,429
C)$985,714
D)$738,300

Question

Quizplus · Accepted Answer

Using the high-low method, we can compute the variable cost per unit:

Variable cost per unit = (Total cost at 230,000 units produced - Total cost at 140,000 units produced) / (230,000 - 140,000)
Variable cost per unit = ($738,300 - $460,000) / 90,000
Variable cost per unit = $2.092

Then, we can use the variable cost per unit to compute the total variable cost at a level of 230,000 units:

Total variable cost = Variable cost per unit x Number of units
Total variable cost = $2.092 x 230,000
Total variable cost = $480,460

Therefore, the total variable costs at a level of 230,000 units would be $480,460.
The best choice is D.

Total Fixed Costs for Green Planes Inc