Question

Total costs may be computed as follows:

a. Fixed costs + (Variable costs per unit x Unit volume)
b. (Fixed costs per unit x Unit volume) + Variable costs
c. Fixed costs per unit + (Variable costs per unit x Unit volume)
d. (Fixed costs per unit x Unit volume) + Variable costs per unit

Answer 1

Total costs are calculated by adding fixed costs to the total variable costs, which is achieved by multiplying the variable cost per unit by unit volume.

Step-by-step explanation:

Total costs can be correctly computed by combining fixed costs with the total variable costs, which is calculated by multiplying the variable costs per unit by the unit volume. Using the example of a barber shop named "The Clip Joint", we have fixed costs of $160 per day and variable costs of $80 per barber each day. To find total costs at a specific level of output, like with two barbers, you would calculate the variable costs (2 barbers × $80 each = $160 in variable costs) and add the fixed costs to get a total of $160 + $160 = $320. Therefore, the correct formula to calculate total costs is a. Fixed costs + (Variable costs per unit × Unit volume).