Question

Brawny Generators is in the process of preparing a production cost budget for August. Actual costs in July for the production of 60 generators were:

Materials cost	$	5,200
Labor cost		2,600
Rent		1,200
Depreciation		1,700
Other fixed costs		4,600
Total	$	15,300

Materials and labor are the only variable costs. If production and sales are budgeted to increase to 70 generators in August, how much is the fixed cost per unit on the August budget?

Multiple Choice

• $107.14

• $125.00

• $218.57

• $130.00

• None of these answer choices is correct.

Answer 1

Solution:

Option A ($ 107.14 ) is the correct answer

Computation of fixed cost per generator  is shown below :

Rent = $ 1,200

Depreciation = $ 1,700

Other fixed costs = $ 4,600

Total fixed costs = $ 7,500 ($ 1,200 +$ 1,700 +$ 4,600)

Number of generators = 70 generators

Fixed cost per generator = Total fixed costs / Number of generators

Fixed cost per generator    = $ 7,500 / 70 generators

Fixed cost per generator = $ 107.14

Conclusion : From the above we can understand that OPTION A satisfies the given requirement in the question whereas remaining Options B,C,D, E do not satisfy the given requirement in question.

Thankyou !!!!!