DuChien Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to $50,000; variable costs were $100,000. How much cost would the company anticipate if during the next period it produced and sold 102,000 units?
A) $150,000.
B) $151,000.
C) $152,000.
D) $153,000.
E) None of the other answers is correct.

Question

Quizplus · Accepted Answer

To calculate the anticipated cost at 102,000 units, we need to use the high-low method to separate the fixed and variable costs:

Variable cost per unit = (Cost at high activity level – Cost at low activity level) / (High activity level – Low activity level)

Variable cost per unit = ($100,000 – 0) / (100,000 – 0)

Variable cost per unit = $1

Using the variable cost per unit, we can calculate the total variable cost at 102,000 units:

Total variable cost = Variable cost per unit x Units produced and sold

Total variable cost = $1 x 102,000

Total variable cost = $102,000

To calculate the total cost, we need to add the total fixed cost to the total variable cost:

Total cost = Fixed cost + Total variable cost

Total cost = $50,000 + $102,000

Total cost = $152,000

Therefore, the anticipated cost at 102,000 units is $152,000. The correct answer is C.

DuChien Corporation Recently Produced and Sold 100,000 Units