Final answer:
Susan is correct because she includes both fixed and variable costs in the calculation of total cost. John's approach is incomplete, as he omits fixed costs, which are critical components of total costs despite being sunk costs. To achieve profitability, a business must cover both types of costs.
Step-by-step explanation:
When considering the total cost of producing goods such as cans, it is important to account for both fixed costs and variable costs. Susan is correct in her approach to find the total cost because she includes both fixed and variable costs in her calculation. Fixed costs, such as rent and equipment, do not change with the level of production, whereas variable costs, like labor and materials, do change with the level of output. John, who only considers variable costs, is not accounting for the complete picture, as fixed costs are an essential component of total costs, even though they are sunk costs and cannot be recouped.
Ignoring fixed costs would lead to an incomplete and potentially misleading calculation of total costs, and hence profitability. Businesses must cover both fixed and variable costs to achieve profitability. Therefore, Susan's method is the right process to find the answer to the total cost of cans because it results in a comprehensive understanding of all expenses incurred by the business.