Question

Maryland Incorporated produces toys. Total manufacturing costs are $ 370 comma 000 when 90 comma 000 toys are produced. Of this​ amount, total variable costs are $ 140 comma 000. What are the total production costs when 105 comma 000 toys are​ produced? (Assume the same relevant range for both production​ levels.)

Answer 1

Total production costs when 105,000 toys are​ produced = $393,275

Step-by-step explanation:

Provided that total cost of manufacturing 90,000 toys = $370,000

Out of which variable cost = $140,000

That means fixed cost = $370,000 - $140,000 = $230,000

Now variable cost per unit = $140,000/90,000 units = $1.555

Therefore cost of producing 105,000 toys with same relevant range = $1.555 X 105,000 = $163,275 = Variable Cost

Note: Fixed cost will remain same as the range of production level is same.

Therefore fixed cost for producing 105,000 units = $230,000

Therefore total cost = $163,275 + $230,000 = $393,275