Question

At a volume of 15,000 units, Pwerson Company incurred $45,000 in factory overhead costs, including $15,000 in fixed costs. If volume increases to 17,000 units and both 15,000 units and 17,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of:

$51,000

$47,000

$49,000

$45,000

Answer 1

$49,000

Working:

Step-1:Calculation of variable cost per unit
	Total factory overhead costs				$       45,000
	Less:Fixed Cost				$       15,000
	Total Variable cost				$       30,000
	/ Total units produced				15000
	Variable cost per unit				$            2.00
Step-2:Calculation of total costs at 17,000 units
	Total Variable cost			17,000	x	$       2.00	=	$ 34,000
	Total fixed costs							$ 15,000
	Total costs							$ 49,000