Callis Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $141.60 per unit. The best estimate of the total monthly fixed cost is:
A)$692,200
B)$725,400
C)$659,000
D)$327,000

Question

Callis Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $141.60 per unit.  The best estimate of the total monthly fixed cost is:
A)$692,200 
B)$725,400 
C)$659,000 
D)$327,000

Quizplus · Accepted Answer

Cost of sales is a variable cost.
Selling and administrative costs:
Variable cost per unit = Change in cost ÷ Change in activity
= ($406,800 - $393,500)÷ (6,000 units - 5,000 units)
= $13,300 ÷ 1,000 units
= $13.30 per unit
Fixed cost = Total cost - Variable cost element
= $406,800 - ($13.30 per unit × 6,000 units)
= $406,800 - $79,800
= $327,000

Callis Corporation Is a Wholesaler That Sells a Single Product