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Total Fixed Costs Are $20,000 Per Month and Last Month

Question 31

Essay

Total fixed costs are $20,000 per month and last month, total variable costs were $7,000 when total revenue was $28,000.
a)Write the algebraic expression for this flexible budget for total cost.
b)What assumptions are made for a linear cost function like this?

Correct Answer:

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Total cost = $20,000 + $7,000/$28,000 x ...

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