Question

how all calculations: Palmer Inc. currently produces 110,000 units at a cost of $440,000. Next year Palmer Inc. expects to produce 115,000 units. Palmer’s relevant range is 100,000 to 120,000 units. If the cost is variable and 115,000 units are produced, the total cost ­­­­­_____. Group of answer choices will decrease will increase to $460,000 will stay the same will be indeterminate

Answer 1

Will increase to $460,000

Step-by-step explanation:

Palmer Inc. currently produces 110,000 units at the rate of $440,000

Next year they are expected to produce 115,000 units

Since the cost is variable, the total cost can be calculated as

(440,000/110,000) × 115,000

= 4×115,000

= $460,000

Hence the total cost is $460,000