At a volume of 5,000 units,Pwerson Company incurred $32,000 in factory overhead costs,including $14,000 in fixed costs.If volume increases to 6,000 units and both 5,000 units and 6,000 units are within the relevant range,then the company would expect to incur total factory overhead costs of:
A) $35,600
B) $21,600
C) $32,000
D) $18,000

Question

Quizplus · Accepted Answer

Total cost = Total fixed cost + Total variable cost
$32,000 = $14,000 + Total variable cost
Total variable cost = $32,000 - $14,000 = $18,000
Variable cost per unit = $18,000 ÷ 5,000 units = $3.60 per unit
Total cost = Total fixed cost + Total variable cost
= $14,000 + ($3.60 per unit × 6,000 units)
= $14,000 + $21,600
= $35,600

At a Volume of 5,000 Units,Pwerson Company Incurred $32,000 in Factory