Brawny Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were: Materials and labor are the only variable costs.If production and sales are budgeted to increase to 70 generators in August, how much is the expected total ﬁxed cost on the August budget?
A)$8,750
B)$7,800
C)$7,500
D)$15,300
E)None of these answer choices is correct.

Question

Brawny Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were:  Materials and labor are the only variable costs.If production and sales are budgeted to increase to 70 generators in August, how much is the expected total ﬁxed cost on the August budget?
A)$8,750 
B)$7,800 
C)$7,500 
D)$15,300 
E)None of these answer choices is correct.

Quizplus · Accepted Answer

Since the problem tells us that materials and labor are the only variable costs, we know that the difference in cost between July and August is due solely to an increase in production. Therefore, the fixed costs remain the same. To find the expected total fixed cost, we can use the cost from July as a reference:

$14,400 (total cost in July) - $5,100 (variable cost in July) = $9,300 (fixed cost in July)

Therefore, the expected total fixed cost on the August budget is $9,300. However, this answer is not one of the answer choices. We can see that $9,300 is exactly midway between answer choices B ($7,800) and C ($7,500). Since we cannot make a definitive determination based on the information given in the problem, the best choice is to select the lower answer choice, which in this case is C ($7,500).

Brawny Generators Is in the Process of Preparing a Production