Question

Hartford Incorporated produces toys. Total manufacturing costs are $360,000 when 50,000 toys are produced. Of this amount, total variable costs are $140,000. What are the total production costs when 95,000 toys are produced? (Assume the same relevant range for both production levels.)

Answer 1

$486,000

Step-by-step explanation:

Total production cost = Total fixed cost + Total variable cost

Fixed cost does not vary with production levels e.g. rent

Variable cost varies with production level e.g. wages of labour

When 50,000 toys are produced:

Fixed cost = $360,000 - $140,000 = $220,000

Variable cost per unit = $140,000 / 50,000 = $2.80

When 95,000 toys are produced, fixed cost would still be $220,000

Total variable cost When 95,000 toys are produced = 95,000 x $2.80 = $266,000

Total production cost = $220,000 + $266,000 = $486,000

I hope my answer helps you