Papa’s project has fixed costs of $70,000 per year. OCF is $30,000 at 5,000 quantities of...
Papa’s project has fixed costs of $70,000 per year. OCF is $30,000 at 5,000 quantities of sales. If quantity sold increases from 5,000 to 5,300, what will be the new OCF after this increase in quantity of sales?
A. 31,000
B. 32,000
C. 33,000
D. 36,000
E. 39,700
Homework Answers
The new OCF after this increase in quantity of sales will be computed as follows:
= ( $ 30,000 / 5000 ) x 5,300 + ( $ 70,000 / 5,000 ) x (5,300 - 5,000)
= $ 36,000
So the correct answer is option D i.e. 36,000
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