Sure, I'd be happy to help you get started! Let's first understand what each term means:
1. Total Variable Cost: The cost that varies with the activity level (number of units produced).
2. Total Fixed Cost: The cost that remains constant regardless of the activity level.
3. Average Variable Cost per Unit: The total variable cost divided by the number of units.
4. Average Fixed Cost per Unit: The total fixed cost divided by the number of units.
5. Average Total Cost per Unit: The sum of the average variable cost per unit and the average fixed cost per unit, or the total cost divided by the number of units.
Now, let's use the provided information to calculate the required values:
At an activity level of 8,800 units:
Total Variable Cost = $146,520
Total Fixed Cost = $219,296
We can calculate the Variable Cost per Unit (VCP) at this activity level:
VCP = Total Variable Cost / Activity Level
VCP = $146,520 / 8,800 units
VCP ≈ $16.64 per unit
Now, let's calculate the required values for an activity level of 8,900 units:
A. The total variable cost:
Total Variable Cost = Variable Cost per Unit × Activity Level
Total Variable Cost = $16.64 × 8,900 units
Total Variable Cost ≈ $148,096
B. The total cost:
Total Cost = Total Variable Cost + Total Fixed Cost
Total Cost = $148,096 + $219,296
Total Cost = $367,392
C. The average variable cost per unit:
Average Variable Cost per Unit = Total Variable Cost / Activity Level
Average Variable Cost per Unit = $148,096 / 8,900 units
Average Variable Cost per Unit ≈ $16.64
D. The average fixed cost per unit:
Average Fixed Cost per Unit = Total Fixed Cost / Activity Level
Average Fixed Cost per Unit = $219,296 / 8,900 units
Average Fixed Cost per Unit ≈ $24.66
E. The average total cost per unit:
Average Total Cost per Unit = Average Variable Cost per Unit + Average Fixed Cost per Unit
Average Total Cost per Unit = $16.64 + $24.66
Average Total Cost per Unit ≈ $41.30
At an activity level of 8,800 units, Pember Corporation's
total variable cost is $146,520 and its total fixed cost is
$219,296. For the activity level of 8,900 units, compute the
following values.
Required:
A. The total variable cost
B. The total cost
C. The average variable cost per unit
D. The average fixed cost per unit
E. The average total cost per unit
Can someone please help me get started? I am so lost with these. Like a formula would help. thanks!
1 answer