If the total cost function is y = 5,000 + 7X,calculate the variable cost for 4,000 units.
A) $33,000
B) $28,000
C) $20,000
D) $5,000

Question

Quizplus · Accepted Answer

To calculate the variable cost for 4,000 units, we need to isolate the variable cost component from the total cost function. The fixed cost component of $5,000 doesn't change with the number of units produced, so we can ignore it when calculating the variable cost.

The variable cost (VC) is simply the slope of the total cost function, which in this case is 7. This means that for every additional unit produced, the cost increases by $7.

To calculate the variable cost for 4,000 units, we can simply multiply the slope (7) by the number of units produced (4,000):

VC = slope x quantity
VC = 7 x 4,000
VC = $28,000

Therefore, the answer is B.

If the Total Cost Function Is Y = 5,000