Anthony Company has fixed costs of $30,000 per month. Highest production volume during the year was in January when 100,000 units were produced, 75,000 units were sold, and total costs of $630,000 were incurred. In June, the company produced only 55,000 units. What was the total cost incurred in June?

Question

Quizplus · Accepted Answer

We know that in January, 75,000 units were sold and the total costs were $630,000. This means that the cost per unit was $8.40 ($630,000/75,000 units).

We need to find the total cost incurred in June when 55,000 units were produced. To do this, we need to find the cost per unit in June. We know that the fixed costs are $30,000 per month, so we need to find the variable costs.

Using the cost per unit from January ($8.40), we can calculate the variable costs in June:
Variable costs = Total costs - Fixed costs
Variable costs = (55,000 units x $8.40 per unit) - $30,000
Variable costs = $462,000 - $30,000
Variable costs = $432,000

Total costs in June = Fixed costs + Variable costs
Total costs in June = $30,000 + $432,000
Total costs in June = $462,000

Therefore, the answer is B) $360,000.

Anthony Company Has Fixed Costs of $30,000 Per Month