(Appendix 5A) One of Matthew Corporation's competitors has learned that Matthew has a total expense per unit of $1.50 at the 15,000 unit level of activity and total expense per unit of $1.45 at the 20,000 unit level of activity. Assume that the relevant range includes all of the activity levels mentioned in this problem.
-What would be the competitor's prediction of total expected costs at 18,000 units?
A) $16,860
B) $26,400
C) $29,100
D) $30,000

Question

Quizplus · Accepted Answer

11ea7761_1888_73da_81a5_9576d4df1a9c_TB2580_00 Variable cost = Change in cost ÷ Change in activity = $6,500 ÷ 5,000 units = $1.30 per unit
Fixed cost element = Total cost - Variable cost element
= $29,000 - ($1.30 per unit × 20,000 units) = $3,000
Y = a + bX = $3,000 + ($1.30 per unit × 18,000 units) = $26,400

(Appendix 5A) One of Matthew Corporation's Competitors Has Learned That