Palmer Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Palmer Inc.expects to produce 115,000 units.Palmer's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?
A)$420,000
B)$430,000
C)$440,000
D)$460,000

Question

Quizplus · Accepted Answer

The cost is variable, meaning it changes with the level of production. The cost per unit is $440,000 / 110,000 units = $4 per unit. For 115,000 units, the cost would be 115,000 units * $4/unit = $460,000.