Perez Company uses activity-based costing.The company is trying to estimate the costs of the processing activity in the factory.The company has developed the following flexible budget formula:
Y = $10.50X + $13,000
Where: Y = Total processing cost per quarter and X = Number of machine hours
If 10,000 machine hours are used next quarter,total variable costs are ________ and total fixed costs are ________.
A) $105,000; $13,000
B) $105,000; $130,000,000
C) $113,000; $130,000,000
D) $10.50; $13,000

Question

Quizplus · Accepted Answer

Using the flexible budget formula:
Y = $10.50X + $13,000
When X = 10,000:
Y = $10.50(10,000) + $13,000
Y = $105,000 + $13,000
Y = $118,000
Therefore, total variable costs are $105,000 (the variable portion of the formula) and total fixed costs are $13,000.

Perez Company Uses Activity-Based Costing