Gamba 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 $170.00 per unit. The best estimate of the total monthly fixed cost is:
A)$865,800
B)$321,000
C)$820,400
D)$775,000

Question

Gamba 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 $170.00 per unit.  The best estimate of the total monthly fixed cost is:
A)$865,800 
B)$321,000 
C)$820,400 
D)$775,000

Quizplus · Accepted Answer

Variable component of cost of goods sold:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($472,200 - $393,500) F1F1F1S1F1F1F10 (6,000 - 5,000)
Variable cost = $78.70 per unit
Fixed cost:
High units: $472,200 - $78.70 F1F1F1S1F1F1F10 6,000 = $0
Low units: $393,500 - $78.70 F1F1F1S1F1F1F10 5,000 = $0
Variable component of selling and administrative expenses:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($393,600 - $381,500) F1F1F1S1F1F1F10 (6,000 - 5,000)
Variable cost = $12.10 per unit
Fixed cost:
High units: $393,600 - $12.10 F1F1F1S1F1F1F10 6,000 = $321,000
Low units: $381,500 - $12.10 F1F1F1S1F1F1F10 5,000 = $321,000
Total variable cost per unit:
$78.70 + $12.10 = $90.80 per unit
Total fixed cost:
$0 + $321,000 = $321,000

Gamba Corporation Is a Wholesaler That Sells a Single Product