Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5300 anchors, Sea Side Enterprises average cost per anchor is $54. If $18,000 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, her forecast for 9000 anchors will be (Round any intermediary calculations to the nearest cent.)
A)$54,000
B)$286,200
C)$486,000
D)$473,400

Question

Quizplus · Accepted Answer

First, we need to determine the variable cost per unit.

At a production level of 5300 anchors, the average cost per anchor is $54.

Variable cost per unit = total cost at 5300 anchors / 5300 = $54

Total cost at 5300 anchors = $54 x 5300 = $286,200

To find the total cost at a production level of 9000 anchors, we can use the cost equation:

Total cost = fixed cost + (variable cost per unit x number of units)

Total cost = $18,000 + ($54 x 9000)

Total cost = $18,000 + $486,000

Total cost = $504,000

Therefore, the forecast for 9000 anchors will be $504,000.

The best choice is D.

Sea Side Enterprises Is Trying to Predict the Cost Associated