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If job 400 includes 50 units, what is the unit product cost for this job?

a) Total cost / Number of units
b) Total cost x Number of units
c) Total cost - Number of units
d) Total cost + Number of units

1 Answer

1 vote

Final answer:

The best production method based on the given costs is Method 1 with a total cost of $9,000. When the cost of labor increases to $200/unit, Method 1 is still the most cost-effective choice with a new total cost of $14,000.

Step-by-step explanation:

To find the best production method based on the given costs of labor and capital, we must calculate the total cost for each method and then compare them.

For Method 1: (50 units of labor × $100/unit) + (10 units of capital × $400/unit) = $5,000 + $4,000 = $9,000
For Method 2: (20 units of labor × $100/unit) + (40 units of capital × $400/unit) = $2,000 + $16,000 = $18,000
For Method 3: (10 units of labor × $100/unit) + (70 units of capital × $400/unit) = $1,000 + $28,000 = $29,000.

Therefore, the best production method with the initial cost of labor is Method 1 with the lowest total cost of $9,000.

If the cost of labor rises to $200/unit, the calculations change.

For Method 1: (50 units of labor × $200/unit) + (10 units of capital × $400/unit) = $10,000 + $4,000 = $14,000
For Method 2: (20 units of labor × $200/unit) + (40 units of capital × $400/unit) = $4,000 + $16,000 = $20,000
For Method 3: (10 units of labor × $200/unit) + (70 units of capital × $400/unit) = $2,000 + $28,000 = $30,000.

When the cost of labor increases, Method 1 still remains the most cost-effective method with a new total cost of $14,000.

User Brian Makin
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