Fasheh Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows: If 10,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to:
A) $128,250
B) $121,500
C) $148,500
D) $135,000

Question

Fasheh Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows:  If 10,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to:
A) $128,250 
B) $121,500 
C) $148,500 
D) $135,000

Quizplus · Accepted Answer

Using the information given, we can calculate the variable cost per unit as follows:

Total cost per unit = Average cost per unit - Fixed cost per unit
$11.50 = $103,500 / 9,000 units - Fixed cost per unit
Fixed cost per unit = $2.00

Using the same formula, we can calculate the total fixed manufacturing cost for 10,000 units as follows:

Total fixed manufacturing cost = Total cost per unit x Number of units - Total variable cost
Total fixed manufacturing cost = $13.50 x 10,000 units - $103,500
Total fixed manufacturing cost = $135,000 - $103,500
Total fixed manufacturing cost = $31,500

Therefore, the closest answer choice is B) $121,500.

Fasheh Corporation's Relevant Range of Activity Is 7,000 Units to 11,000