Question

Exercise 11-6 Fixed versus variable cost behavior LO 11-1 Munoz Trophies makes and sells trophies it distributes to little league ballplayers. The company normally produces and sells between 6,000 and 12,000 trophies per year. The following cost data apply to various activity levels: Required Complete the preceding table by filling in the missing amounts for the levels of activity shown in the first row of the table. (Round "Cost per unit" answers to 2 decimal places.) 6,000 8,000 10,000 12,000 Number of Trophies Total costs incurred Fixed Variable Total costs $ 76,000 42,000 118,000 $ $ 0 $ 0 $ 0 Cost per unit $ 12.67 Fixed Variable Total cost per trophy 7.00 $ 19.67 $ 0.00 $ 0.00 $ 0.00

Answer 1

Number of Trophies 6,000 8,000 10,000 12.000 Total Costs incured Fixed $ 76,000 $ 76,000 $ 76,000 S 76,000 Variable $ 42,000 $ 56,000 $ 70,000 $ 84,000 Total Costs $ 118,000 $132.000 $ 146,000 $ 160,000 Cost per Unit Fixed S 12.67 $ 9.50 S 7.60 S 6.33 Variable S 7.00 S 7.00 S 7.00 7.00 Total Cost per trophy S 19.67$ 16.50S 14.60S 13.33 Working Notes: Variable Cost per Unit at 6,000 Units = $42,000/6,000 = $7 Variable Cost per Unit at 8,000 Units = 8,000*$7 = $56,000 Variable Cost per Unit at 10,000 Units = 10,000*$7 = $70,000 Variable Cost per Unit at 12,000 Units = 12.000*$7 = $84,000 Total Fixed Cost value doesn't change based on increase or decrease in production. Fixed Cost per Unit 8,000 Units = $76,000/8,000 = $9.5 10,000 Units = $76,000/10,000 = $7.60 12,000 Units = $76,000/12,000 = $6.33