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Fixed Versus Fixed Cost Behavior (Lovvern Trophies)

Lovvern Trophies makes and sells trophies to little league ball players. The company normally produces and sells between 8,000 and 14,000 trophies per year. The following cost data apply to various activity levels.

Number of Trophies 8,000 10,000 12,000 14,000
Total Costs incurred
Fixed $42,000
Variable $42,000
Total Costs $84,000
Cost per unit
Fixed $5.25
Variable $5.25
Total cost per trophy $10.50

Required:
a. Complete the proceeding table by filling out the missing amounts for the levels of activity shown in the first row of the table. Round all cost per unit figures to the nearest whole penny.
b. Explain why the total cost per trophy decreases as the number of trophies increases.

Solution Preview

Dear student: Solution is provided below...

Lovvern Trophies
(a) Table showing Total and unit cost at various levels of activity

Number of Trophies 8,000 10,000 12,000 14,000
Total Costs incurred
Fixed $42,000 42000 42000 42000
Variable $42,000 52500 63000 73500
Total Costs $84,000 94500 105000 115500
Cost per unit
Fixed $5.25 4.20 3.50 3.00
Variable $5.25 5.25 5.25 ...

Solution Summary

The solution fills out a table of activity levels and explains why cost per trophy decreases as trophy numbers increase for the given data in 295 words.

$2.19