Historically, electricity has a $500,000 fixed component and 4% of sales variable component. Next year's sales are forecasted to be $10,000,000. The electricity budget would be
A) $1,000,000.
B) $750,000.
C) $1,200,00.
D) $900,000.

Question

Quizplus · Accepted Answer

The electricity budget consists of a fixed component of $500,000 and a variable component that is 4% of the forecasted sales ($10,000,000). The variable component is $10,000,000 * 4% = $400,000. Therefore, the total electricity budget is $500,000 + $400,000 = $900,000.

Historically, Electricity Has a $500,000 Fixed Component and 4% of Sales