Logan Inc.plans to double its rental space next year which will increase its fixed costs by 40 per cent while variable costs remain the same.Current year costs are as follows:
$\begin{array}{ll}
\text { Variable costs } & \$ 10 \text { per unit } \
\text { Fixed costs } & \$ 30000
\end{array}$
If next year production is expected to be 20 000 units,estimated total costs will be:
A) $242 000
B) $230 000
C) $322 000
D) $212 000

Question

Logan Inc.plans to double its rental space next year which will increase its fixed costs by 40 per cent while variable costs remain the same.Current year costs are as follows:
$\begin{array}{ll}
\text { Variable costs } & \$ 10 \text { per unit } \
\text { Fixed costs } & \$ 30000
\end{array}$ 
If next year production is expected to be 20 000 units,estimated total costs will be:
A) $242 000
B) $230 000
C) $322 000
D) $212 000

Quizplus · Accepted Answer

The fixed costs will increase by 40%, so new fixed costs = $30,000 + (0.40 * $30,000) = $42,000. Variable costs for 20,000 units = $10 * 20,000 = $200,000. Total costs = Fixed costs + Variable costs = $42,000 + $200,000 = $242,000.

Logan IncPlans to Double Its Rental Space Next Year Which Will