Question

When 19,000 units are produced variable costs are $41 per unit and total costs are $1,080,000. What are the total costs when 24,000 units are produced?

Answer 1

Total cost would be $ 1,285,000

Explanation:

Consider fixed cost is x and variable cost is y per unit, ( both are in dollars )

So, the total cost of 19000 units = fixed cost + variable cost × number of units produced

= x + 19000y

if y = $ 41 per unit,

Then total cost = x + 19000(41) = x + 779000

According to the question,

x + 779000 = 1,080,000

⇒ x = 1,080,000 - 779000 = 301000

Thus, fixed cost = $ 301000

Hence, the total cost for 24,000 units = 301000 + 24000(41)

= 301000 + 984000

= $ 1,285,000