Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers: The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?

Question

Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers:  The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?

Quizplus · Accepted Answer

To find the total cost of producing 2,000 tires, we need to use the cost per unit data provided in the question. The total cost is calculated as follows:

Total cost = Fixed cost + (Variable cost per unit x Number of units)

Fixed cost = $20,000
Variable cost per unit = $24

For 2,000 tires:
Total cost = $20,000 + ($24 x 2,000)
Total cost = $20,000 + $48,000
Total cost = $68,000

Therefore, the total cost of producing 2,000 tires is $68,000. Option C is the correct answer.

Wheel and Tire Manufacturing Currently Produces 1,000 Tires Per Month