Faulks Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished.The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of August, it assumed that 23 containers would have been refurbished.However, 26 containers were actually refurbished during August. The amount shown for total expenses in the planning budget for August would have been closest to:

A) $111,904
B) $126,500
C) $122,400
D) $128,100

Question

Faulks Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished.The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes.

When the company prepared its planning budget at the beginning of August, it assumed that 23 containers would have been refurbished.However, 26 containers were actually refurbished during August. The amount shown for total expenses in the planning budget for August would have been closest to:

A) $111,904
B) $126,500
C) $122,400
D) $128,100

Chanielle Connor · Accepted Answer

Final Answer : C, Explanation :  First, let's calculate the actual variable cost per unit:Variable cost per unit = (Actual variable cost - Fixed cost) / Units produced= ($58,500 - $52,000) / 26= $250Next, we can use this variable cost per unit to calculate the total variable cost for the 26 units produced:Total variable cost = Variable cost per unit x Units produced= $250 x 26= $6,500Finally, we can add the variable cost and fixed cost to get the total expenses for August:Total expenses = Variable cost + Fixed cost= $6,500 + $116,900= $123,400This is closest to option C, $122,400.

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