Kaelker Corporation reports that at an activity level of 7,000 units, its total variable cost is $590,730 and its total fixed cost is $372,750. What would be the total cost, both fixed and variable, at an activity level of 7,100 units? Assume that this level of activity is within the relevant range.
A)$963,480
B)$977,244
C)$971,919
D)$970,362

Question

Quizplus · Accepted Answer

Using the cost formula, we can calculate the total cost as:

TC = FC + (VC per unit x Activity level)
VC per unit = Total VC / Activity level
VC per unit = $590,730 / 7,000 units = $84.39 per unit

TC = $372,750 + ($84.39 x 7,100)
TC = $971,919

Therefore, the total cost at an activity level of 7,100 units would be $971,919. The correct answer is (C).

Kaelker Corporation Reports That at an Activity Level of 7,000