Question

Children's World Toy Shop is an on-line toy store specializing in hand made stuffed animals. Children's World sold 4,000 Donny the Dragon stuffed toys during April and 6,000 during May. Shipping costs for the two months were $12,000 and $16,800 respectively. Using these two months' data, the shipping cost function is best estimated as

A. ($2 x number of toys sold) + $70,000.
B. ($3 x number of toys sold) + $2,880.
C. ($2.40 x number of toys sold) + $2,400.
D. ($0.50 x number of toys sold) + $10,000.

Answer 1

C. ($2.40 x number of toys sold) + $2,400.

Step-by-step explanation:

`\left[\begin{array}{ccc}High&6000&16800\\Low&4000&12000\\Diference&2000&4800\\\end{array}\right]`

We subtract high from low. We obtain that 2,000 toys shipped generate 4,800 dollars of cost therefore: 4,800 / 2,000 = 2.4 variable cost

Then, we solve for fixed cost:

Total Cost $ 16,800

Variable: 6,000 units x $2.4 = $ (14,400)

Fixed Cost $ 2,400

This makes option C the correct formula for shipping cost.