Donahue currently produces 120,000 units at a cost of $400,000.Of the $400,000 cost,$200,000 is a fixed cost.Next year Donahue expects to produce 145,000 units.Donahue's relevant range for production activities is 100,000 to 150,000 units.If 145,000 units are produced next year,what is the expected fixed cost for next year?
A) $200,000
B) $241,667
C) $441,667
D) $483,333

Question

Quizplus · Accepted Answer

Since the relevant range for Donahue's production activities is from 100,000 to 150,000 units and the company is already producing within this range, the fixed cost of $200,000 will not change regardless of how many units are produced in the next year. Therefore, the expected fixed cost for next year will still be $200,000.

Donahue Currently Produces 120,000 Units at a Cost of $400,000