Callaham 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 $115.80 per unit.
-The best estimate of the total monthly fixed cost is:
A)$24,000
B)$478,050
C)$427,600
D)$528,500

Question

Callaham 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 $115.80 per unit. 
-The best estimate of the total monthly fixed cost is:
A)$24,000 
B)$478,050 
C)$427,600 
D)$528,500

Quizplus · Accepted Answer

Variable component of cost of goods sold:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($422,500 - $338,000) F1F1F1S1F1F1F10 (5,000 - 4,000)
Variable cost = $84.50 per unit
Fixed cost:
High units: $422,500 - $84.50 F1F1F1S1F1F1F10 5,000 = $0
Low units: $338,000 - $84.50 F1F1F1S1F1F1F10 4,000 = $0
Variable component of selling and administrative expenses:
Variable cost = Change in costs F1F1F1S1F1F1F10 Change in units
Variable cost = ($106,000 - $89,600) F1F1F1S1F1F1F10 (5,000 - 4,000)
Variable cost = $16.40 per unit
Fixed cost:
High units: $106,000 - $16.40 F1F1F1S1F1F1F10 5,000 = $24,000
Low units: $89,600 - $16.40 F1F1F1S1F1F1F10 4,000 = $24,000
Total variable cost per unit:
$84.50 + $16.40 = $100.90 per unit
Total fixed cost:
$0 + $24,000 = $24,000

Callaham Corporation Is a Wholesaler That Sells a Single Product