Step-fixed cost adjustment in total cost calculation Steps:

• Variable cost per unit = ($380,000 -$230,000) / (20,000 - 10,000 units) = $15/unit.
• Base fixed costs = $230,000 - (10,000 ×$15) = $80,000.
• At 25,000 units (>20,000), adjusted fixed costs = $80,000 +$30,000 = $110,000.
• Total costs = $110,000 + (25,000 ×$15) = $485,000. Why B is correct:
• Matches high-low method for variable costs plus step-up in fixed costs per the production threshold rule. Why the others are wrong:
• A: Extrapolates without adding $30,000 fixed cost increase ($80,000 + 25,000×$15 =$450,000).
• C: Overstates by adding fixed increase twice or misapplying variable rate ($80,000 +$30,000 + 25,000×$20? =$530,000).
• D: Uses incorrect variable cost or base total, leading to excessive figure. Final answer: B