Question

A small clothing firm currently produces 50,000 shirts and blouses per month. The costs of its factory, raw materials, and labor is $500,000 per month. If the company is to increase production by 5,000 and that requires an additional labor and raw material expense of $100,000, what is the best estimate of costs of the increased production?

a. $100,000
b. $400,000
c. $500,000
d. $600,000

Answer 1

The correct answer is option d.

Step-by-step explanation:

The firm here is producing 50,000 units of clothing.

It is incurring a cost of $500,000 in the production process.

The company is to increase production by 5,000 units of clothing.

This requires an additional cost of $100,000.

The cost of increased production will be

= $500,000 + $100,000

= $600,000

So, option d is the correct answer.