Ruskin Company had utilities cost of $95,000 at an output level of 30,000 units. The utilities cost was a mixed cost and the fixed portion was $50,000. What would the estimate of total utilities cost be at an output level of 40,000 units?
A) $65,000
B) $95,000
C) $110,000
D) $125,000

Question

Quizplus · Accepted Answer

The variable portion of the mixed cost can be calculated as follows:

Variable portion = Total utilities cost - Fixed portion
Variable portion = $95,000 - $50,000
Variable portion = $45,000

The formula to estimate total mixed cost is:

Total mixed cost = Fixed cost + (Variable cost per unit x Number of units)

Using the variables calculated above, we can estimate the total utilities cost at an output level of 40,000 units as:

Total utilities cost = $50,000 + ($45,000/30,000 x 40,000)
Total utilities cost = $50,000 + $60,000
Total utilities cost = $110,000

Therefore, the best choice is C.

Ruskin Company Had Utilities Cost of $95,000 at an Output