Total costs for Watson & Company at 100,000 units are $350,000, while total fixed costs are $150,000. The total variable costs at a level of 200,000 units would be
A) $700,000.
B) $175,000.
C) $400,000.
D) $300,000.

Question

Quizplus · Accepted Answer

The total fixed cost remains the same no matter how many units are produced. So, if the total cost at 100,000 units is $350,000, we can calculate the variable cost per unit by subtracting the fixed cost from the total cost and dividing by the number of units:

Variable cost per unit = (Total cost - Fixed cost) / Number of units
= ($350,000 - $150,000) / 100,000
= $2

Using this variable cost per unit, we can calculate the total variable cost at a level of 200,000 units:

Total variable cost = Variable cost per unit x Number of units
= $2 x 200,000
= $400,000

Therefore, the answer is C.

Total Costs for Watson & Company at 100,000 Units Are