What is the total cost at an activity of 2,000 units?

An organisation has the following total costs at two activity levels. Activity Level (units) 16,000 22,000 Total Costs ($) 135,000 170,000. Variable cost per unit is constant within this range of activity but there is a step up of $5,000 in the total fixed costs when the activity exceeds 17,500 units.

Asked by Natashanelesh, Last updated: Apr 22, 2024

+ Answer

Request

0
Follow

Share

Answer Anonymously
Answer Later

Copy Link

1 Answer

John Smith

Answered Feb 24, 2017

$160,000

Variable Cost/Unit: [(170,000-5,000) - 135,000] / (22,000 - 16,000) = $5 Total Fixed Cost (below 17,000 units): [135,000 - (16,000 x 5)] = $ 55,000 Total Cost for 20,000 units: 55,000 + 5,000 + (20,000 x 5) = $160,000