Final answer:
In the cost formula Y = A + Bx, 'B' represents the variable cost per unit. This component of the formula varies with the level of output, such as the cost of hiring additional barbers in a barbershop, and is instrumental in calculating total costs.
Step-by-step explanation:
In the cost formula Y = A + Bx, the B represents the variable cost per unit. This cost formula is typically used in business to determine total costs based on production levels.
For example, let's consider a barber shop with fixed costs of operating (space and equipment) totaling $160 per day. If they hire barbers at a rate of $80 per barber each day, this constitutes the variable cost. The total cost of operating the barbershop with two barbers would be calculated by adding the fixed costs to the variable costs, $160 + (2 x $80), which equals $320. Here, the number 2 represents the 'x' variable, which is the quantity of barbers, and $80 represents the 'B' variable, which is the variable cost per unit.
The variable cost per unit is pivotal because it changes according to the level of output or activity. As production increases, variable costs increase proportionally.