At a production level of 5,280 units, a project has total costs of $150,000. The variable cost per unit is $23.12. Assume the firm can increase production by 750 units without increasing its fixed costs. What will the total costs be if 6,000 units are produced?
A) $122,780
B) $124,640
C) $138,720
D) $122,074
E) $166,646

Question

Quizplus · Accepted Answer

To calculate the total costs at 6,000 units, first determine the fixed costs at the initial production level of 5,280 units. Subtract the total variable costs from the total costs: Total variable costs = 5,280 units * $23.12 per unit = $122,073.60. Total costs at 5,280 units = $150,000. Fixed costs = $150,000 - $122,073.60 = $27,926.40. For 6,000 units, total costs = (6,000 units * $23.12) + fixed costs = $138,720 + $27,926.40 = $166,646.40.

At a Production Level of 5,280 Units, a Project Has