Answer:
Total cost= $36,000
Explanation:
Giving the following information:
Winston Company’s high and low level of activity last year was 60,000 units produced in April and 20,000 units produced in December. Machine maintenance costs were $52,000 in April and $20,000 in December.
To calculate the total cost, first, we need to calculate the unitary variable cost. With the unitary variable cost, we can calculate the fixed costs. Then, the total cost at 40,000 units.
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (52,000 - 20,000) / (60,000 - 20,000)= $0.8 per unit
Now, we calculate the fixed costs:
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 52,000 - (0.8*60,000)= $4,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 20,000 - (0.8*20,000)= $4,000
Total cost= 4,000 + 0.8*units
Total cost= 4,000 + 0.8*40,000= $36,000
