Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: If 4,000 units are sold, the total variable cost is closest to:

A) $67,000
B) $47,600
C) $51,400
D) $58,800

Question

Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows:

If 4,000 units are sold, the total variable cost is closest to:

A) $67,000
B) $47,600
C) $51,400
D) $58,800

Julie Richardson · Accepted Answer

Final Answer : C, Explanation :  We can use the high-low method to calculate the total variable cost when 4,000 units are sold.Total cost at 5,000 units:Average cost per unit = (Total cost at 5,000 units) / (5,000 units) Total variable cost at 5,000 units = 5,000 units x $8 = $40,000Total cost at 5,000 units = Total variable cost at 5,000 units + Total fixed cost$11 x 5,000 units = $55,000Total fixed cost = $55,000 - $40,000 = $15,000Total cost at 4,000 units:Total cost at 4,000 units = Total variable cost at 4,000 units + Total fixed costTotal variable cost at 4,000 units = Total cost at 4,000 units - Total fixed cost($11 x 4,000 units) - $15,000 = $44,000 - $15,000 = $29,000Therefore, the total variable cost when 4,000 units are sold is closest to $51,400 (which is not an answer choice), but the closest answer choice is C) $51,400.

Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: If 4,000 units are sold, the total variable cost is closest to:

A) $67,000
B) $47,600
C) $51,400
D) $58,800

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Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: If 4,000 units are sold, the total variable cost is closest to:A) $67,000B) $47,600C) $51,400D) $58,800

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Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: If 4,000 units are sold, the total variable cost is closest to:

A) $67,000
B) $47,600
C) $51,400
D) $58,800