Callander 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 $151.60 per unit.
-The best estimate of the total monthly fixed cost is:
A)$846,000
B)$886,050
C)$365,400
D)$926,100

Question

Callander 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 $151.60 per unit.  
-The best estimate of the total monthly fixed cost is:
A)$846,000 
B)$886,050 
C)$365,400 
D)$926,100

Quizplus · Accepted Answer

Cost of sales is a variable cost.
Selling and administrative costs:
Variable cost per unit = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($441,000 - $430,200)F1F1F1S1F1F1F10 (7,000 units - 6,000 units)
= $10,800 F1F1F1S1F1F1F10 1,000 units
= $10.80 per unit
Fixed cost = Total cost - Variable cost element
= $441,000 - ($10.80 per unit F1F1F1S1F1F1F10 7,000 units)
= $441,000 - $75,600
= $365,400

Callander Corporation Is a Wholesaler That Sells a Single Product