Organize, Inc.has only variable costs and ﬁxed costs.A review of the company's records disclosed that when 200,000 units were produced, ﬁxed manufacturing costs amounted to $800,000 and the cost per unit manufactured totaled $11.On the basis of this information, how much cost would the ﬁrm anticipate at an activity level of 205,000 units?
A)$2,235,000.
B)$2,222,000.
C)$2,214,000.
D)$2,200,000.
E)None of the answers is correct.

Question

Quizplus · Accepted Answer

The variable cost per unit is $11 - $4 = $7.  At an activity level of 205,000 units, the variable cost would be 205,000 * $7 = $1,435,000.  The fixed cost is $800,000.  Therefore, the total cost at an activity level of 205,000 units would be $1,435,000 + $800,000 = $2,235,000.