Gamach Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $104.50 per unit. The best estimate of the total monthly fixed cost is:
A) $102,000
B) $518,900
C) $556,800
D) $481,000

Question

Gamach Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $104.50 per unit.  The best estimate of the total monthly fixed cost is:
A) $102,000 
B) $518,900 
C) $556,800 
D) $481,000

Quizplus · Accepted Answer

Variable cost of sales per unit = Change in cost ÷ Change in activity
= ($354,000 - $295,000) ÷ (6,000 units - 5,000 units)
= $59,000 ÷ 1,000 units
= $59.00 per unit
Fixed cost of sales:
 11eacbfc_c8a7_849a_8ffe_85eab3acee6c_TB7552_00 Variable selling and administrative cost per unit = Change in cost ÷ Change in activity
= ($202,800 - $186,000) ÷ (6,000 units - 5,000 units)
= $16,800 ÷ 1,000 units
= $16.80 per unit
Fixed cost of sales:
 11eacbfc_c8a7_d2bb_8ffe_675c79254f29_TB7552_00 Total fixed cost = $0 + $102,000 = $102,000

Gamach Corporation Is a Wholesaler That Sells a Single Product