Hamiter Framing's cost formula for its supplies cost is $1,640 per month plus $9 per frame.For the month of August, the company planned for activity of 572 frames, but the actual level of activity was 573 frames.The actual supplies cost for the month was $7,080.The supplies cost in the planning budget for August would be closest to:

A) $7,080
B) $7,068
C) $6,788
D) $6,797

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Leticia Quintanilla · Accepted Answer

Final Answer : C, Explanation :  Using the cost formula, we can calculate the planned supplies cost as follows:Planned supplies cost = $1,640 + ($9 per frame x 572 frames)Planned supplies cost = $6,788Since the actual supplies cost was higher than the planned supplies cost, we can eliminate choices A and B.Choice C is the closest to the planned supplies cost of $6,788.Therefore, the best choice is C. Cost = Fixed cost + (Variable cost per unit × q)= $1,640 + ($9 × 572)= $6,788

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