Exhibit 5-5
Tyler Incorporated sells 5,000 units per month with the following costs:
Variable costs: $1.25 per unit
Fixed costs: $3,000 per month
-Refer to Exhibit 5-5.Tyler recently switched vendors and expects variable costs to rise by $1.00 per unit.However,with a new lease on the factory,Tyler expects fixed costs to drop by $300 per month.
In the month after the change in suppliers and the signing of the new lease,Tyler anticipates selling 5,500 units per month.What will be the estimated total costs each month?
A)$12,375
B)$15,075
C)$2,700
D)$11,250
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

Under the new circumstances, the variable cost per unit will increase from $1.25 to $2.25 ($1.00 increase).
Total variable costs will be 5,500 units × $2.25 per unit = $12,375 per month.

Fixed costs will decrease from $3,000 to $2,700 per month.

Total estimated costs will be:

Total costs = Variable costs + Fixed costs
Total costs = $12,375 + $2,700
Total costs = $15,075

Therefore, the estimated total costs each month will be $15,075. Option B is the correct answer.

Exhibit 5-5 Tyler Incorporated Sells 5,000 Units Per Month with the Following