Best Birdies produces ornate birdcages. The company's average cost per unit is $22 when it produces 2700 birdcages. If $5700 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 3500 birdcages will be

Question

Quizplus · Accepted Answer

We can use the cost equation formula to solve this problem:

Total Cost = Fixed Costs + (Average Cost per Unit x Number of Units)

We are given that the average cost per unit is $22 when 2700 birdcages are produced. Therefore, we can find the variable cost per unit:

$22 = Total Variable Costs / 2700
Total Variable Costs = $59,400

Now we can use the cost equation to find the total cost for 3500 birdcages:

Total Cost = $5700 + ($22 x 3500)
Total Cost = $75,315

Therefore, the forecast for 3500 birdcages is $75,315. Option A is the correct answer.

Best Birdies Produces Ornate Birdcages