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Question 2 Alifulhubey company produced a single product called Killi and he provide you following 3...

Question 2

Alifulhubey company produced a single product called Killi and he provide you following 3 months cost data of the current year 2018.

Month	Production units	Total cost (MVR)
January	1,200	66,600
February	900	58,200
March	1,400	68,200

It is assumed that Alifulhubey company variable cost per unit is constant up to a production level of 2,000 units per month but a step up of MVR 6,000 in the monthly total fixed cost occurs when production reaches 1,100 units per month.

Calculate the total cost for a month of Alifulhubey company when 1,000 units are produced?

Expert Solution

Additional amount of fixed cost, MVR 6,000, is added in both January and March costs, because their productions are more than 1,100 units. Therefore, these are considered for calculating variable cost per unit.

Variable cost per unit = Difference in total cost / Difference in units

= (68,200 – 66,600) / (1,400 – 1,200)

= 1,600 / 200

= 8 per unit

Total fixed cost for 1,000 units = February total cost - (February units × Variable cost per unit)

= 58,200 – (900 × 8)

= 58,200 – 7,200

= 51,000

Total cost for 1,000 units = Total fixed cost + Total variable cost

= 51,000 + (1,000 × 8)

= 51,000 + 8,000

= 59,000 (Answer)

ekkarill92 answered 1 year ago

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