Detailed Answer
(b) The requirement is to find the total budgeted costs
for the seven stores in the coming year. Fixed costs last year were
$70,000, and therefore variable costs totaled $430,000. The key
is to find the variable costs per store. This is calculated by dividing
variable costs ($430,000) by the number of stores last year
(five), or, $86,000. Therefore, total costs budgeted in the new
year is calculated as follows:
Variable cost per store $ 86,000
Number of stores × 7
Total budgeted variable costs 602,000
Add: fixed costs 70,000
Total budgeted costs $672,000