Ask Question
23 April, 12:44

Flagstags Brewery's flexible budget estimates are $74,000, $77,000, and $80,000 to manufacture 4,000, 4,500, and 5,000 gallons of beer, respectively, next quarter. What are the variable and fixed manufacturing costs in the flexible budget for Flagstags?

+1
Answers (1)
  1. 23 April, 13:32
    0
    Fixed cost = $50,000 and variable cost is $24,000

    Explanation:

    As we know that

    Total cost = Variable cost + fixed cost

    where,

    Variable cost = Number of gallons of beer * variable cost per gallon

    The variable cost per gallon is

    = ($77,000 - $74,000) : (4,500 - 4,000)

    = ($3,000) : (500)

    = $6

    So, the variable cost is

    = 4,000 units * $6

    = $24,000

    And, the total cost is $74,000

    So, the fixed cost is

    = $74,000 - $24,000

    = $50,000
Know the Answer?