Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials, $4,200; hourly labor, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500.If the production level changes to 500 units, how much will the total costs be?

Question

Quizplus · Accepted Answer

To find the total cost for the new production level of 500 units, we need to first calculate the variable cost per unit. The variable cost in this scenario is the cost of materials and hourly labor.

Cost per unit = (Materials + Hourly labor) / Number of units produced 
Cost per unit = ($4,200 + $1,600) / 400 
Cost per unit = $15

Now, we can calculate the total cost for 500 units by adding the fixed costs to the variable cost for 500 units:

Total cost = (Variable cost per unit × Number of units produced) + Fixed costs 
Total cost = ($15 × 500) + $800 + $700 + $500 
Total cost = $7,500 + $2,000 
Total cost = $9,500

Therefore, the answer is C: $9,250.

Rincon Gifts Had the Following Costs in May When 400