Lewis Corporation plans to increase its advertising budget by 20% next year.
currently spends $15,000 on advertising costs.
In addition to advertising, Lewis spends $50,000
per year for other fixed costs and $15 per unit for variable costs.
If Lewis anticipates producing 25,000 units next year, what will be next year’s
estimated total costs?
Total Costs = Fixed Costs + Variable Cost per Unit (x)
Total Costs = $68,000
+ $15 (25,000)
FC = [15,000 + .20(15,000)] + $50,000 = $68,000
Reliable Movers Inc. documented the miles driven and total moving van costs for the past five
months as follows:
Number of Miles
Total Vehicle Costs
A. Which two months exhibit the high and low activity levels?
B. Using the high/low method, what is the variable cost per mile?