Answer the following questions using the information below:
For Divaxo Company, labor-hours are 30,000 and wages $130,000 at the high point of the relevant range, and labor-hours are 18,000 and wages $85,000 at the low point of the relevant range.
-What is the estimated total labor costs at Divaxo Company when 11,000 labor-hours are used?
A) $51,944
B) $58,750
C) $56,270
D) $52,042

Question

Quizplus · Accepted Answer

The variable cost per labor-hour is ($130,000 - $85,000) / (30,000 - 18,000) = $3.75. The fixed cost is $85,000 - (18,000 * $3.75) = $17,500. For 11,000 labor-hours, the total cost is (11,000 * $3.75) + $17,500 = $58,750.

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