managerial accounting question 2

Gambarini Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $212.90 per unit.

Sales volume (units)	4,400	5,420
Cost of sales	$356,400	$439,020
Selling and administrative costs	$620,000	$641,420

  
The best estimate of the total monthly fixed cost is:

	$1,022,360
	$976,400
	$1,080,440
	$527,600

Variable cost of sales per unit = Change in cost ÷ Change in activity
= ($439,020 - $356,400) ÷ (5,420 units - 4,400 units)
= $82,620 ÷ 1,020 units
= $81.00 per unit
Fixed cost of sales:

Total cost at 5,420 units	$439,020
Less variable cost element: 5,420 units × $81.00 per unit	439,020
Fixed cost	$0

Variable selling and administrative cost per unit = Change in cost ÷ Change in activity
= ($641,420 - $620,000) ÷ (5,420 units - 4,400 units)
= $21,420 ÷ 1,020 units
= $21.00 per unit
Fixed cost of sales:

Total cost at 5,420 units	$641,420
Less variable cost element: 5,420 units × $21.00 per unit	113,820
Fixed cost	$527,600

Total fixed cost = $0 + $527,600 = $527,600

Multiple Choice	Learning Objective: 02-03 Understand cost behavior patterns including variable costs, fixed costs, and mixed costs.
Difficulty: Medium	Learning Objective: 02-04 Analyze a mixed cost using a scattergraph plot and the highlow method.