Final answer:
Ballard Company's total production cost of $8,700 represents both fixed and variable costs; marginal costs and revenues are important in determining the most profitable level of production.
Step-by-step explanation:
The question relates to the concept of total costs in business, which includes both fixed costs and variable costs. In the context of producing goods, fixed costs are the expenses that do not change with the amount of goods produced, such as rent or salaries, and are incurred even when production is zero. At zero production for Ballard Company, we have fixed costs of $160. As production increases, variable costs, which vary with the level of output, such as raw materials and labor, are added to fixed costs. The total cost is the sum of fixed and variable costs. Understanding this relationship helps companies determine how much of a product to produce and at what point they can achieve profitability.To calculate the marginal cost, which is the cost of producing one additional unit, and marginal revenue, which is the revenue from selling one additional unit, we would examine the change in total cost and total revenue respectively with each additional unit produced and sold.In conclusion, the Ballard Company's $8,700 total cost is the combination of fixed and variable costs. Assessing these costs is crucial for any business to make informed production and pricing decisions to maximize profits.