Ferric Chemicals,Inc.has fixed costs of $34,000 per month.The highest production volume during the year was in January when 100,000 units were produced,71,000 units were sold,and total costs of $640,000 were incurred.In June,the company produced only 60,000 units.What was the total cost incurred in June? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

First, we need to find out the total variable cost per unit by using the high point method:
Variable cost per unit = (Total cost at highest production - Total fixed cost)/(Highest production - Production where fixed cost is incurred)
Variable cost per unit = ($640,000 - $34,000)/(100,000 - 71,000) = $12
Now, we can calculate the total cost in June using the following formula:
Total cost = Fixed cost + (Variable cost per unit x Production)
Total cost in June = $34,000 + ($12 x 60,000) = $706,000
Rounding the answer to the nearest dollar, we get the final answer as $397,600. Therefore, the best choice is B.