Question

Machine A has a fixed cost of $40,000 per year and a variable cost of $60 per unit produced. Machine B has an unknown fixed cost, but with the process being used it is possible to produce 200 units per month with a total variable cost of $2,000. If the total costs of the 2 machines balance with a rate production of 2,000 units per year, what is the fixed cost of machine B?

Answer 1

To find the fixed cost of machine B, we set up an equation using the given information and solve for the fixed cost. The equation is: $40,000 + (60 * 2,000) + Fixed cost of machine B = Total cost of producing 2,000 units per year.

Step-by-step explanation:

To find the fixed cost of machine B, we need to set up an equation using the information given. Machine A has a fixed cost of $40,000 per year and a variable cost of $60 per unit produced. Machine B has an unknown fixed cost, but with a production of 200 units per month, the total variable cost is $2,000. Since we want the total costs of both machines to balance when producing 2,000 units per year, we can use the following equation:

Total cost of machine A + Total cost of machine B = Total cost of producing 2,000 units per year

Using the information provided, the equation becomes:

$40,000 + (60 * 2,000) + Fixed cost of machine B = Total cost of producing 2,000 units per year

Simplifying the equation:

$40,000 + 120,000 + Fixed cost of machine B = Total cost of producing 2,000 units per year

Now, we can solve for the fixed cost of machine B:

Fixed cost of machine B = Total cost of producing 2,000 units per year - $40,000 - $120,000