The cost components of a heater include $35 for the compressor, $12 for the sheet molded compound frame, and $80 per unit for assembly. The factory machines and tools cost is $55,000. The company expects to produce 1,500 heaters in the coming year. What cost function best represents these costs?
A)y = 1,500 + 127X
B)y = 1,500 +55,000X
C)y = 55,000 + 1,500X
D)y = 55,000 +127X

Question

Quizplus · Accepted Answer

The fixed cost is $55,000, and the variable cost per unit is $35 + $12 + $80 = $127. The cost function is y = 55,000 + 127X, where X is the number of units produced.

The Cost Components of a Heater Include $35 for the Compressor