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Based on a predicted level of production and sales of 16,000 units, a company anticipates reporting...

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Accounting

Based on a predicted level of production and sales of 16,000units, a company anticipates reporting operating income of $22,000after deducting variable costs of $96,000 and fixed costs of$10,000. Based on this information, the budgeted amounts of fixedand variable costs for 18,000 units would be:

Answer & Explanation Solved by verified expert
4.3 Ratings (503 Votes)

Variable cost = $108,000

Fixed cost = $10,000

Explanation:

Variable cost per unit = Variable cost for producing 16,000 units / Total number of units

                                  = $96,000 / 16,000 units

                                 = $6

Therefore,

Variable cost (18,000 units) = Units produced * Variable cost per unit

                                             = 18,000 units * $6

                                             = $108,000

As the fixed cost does not vary with the number of units produced, total fixed cost shall remain unchanged.
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