Fresh Best Friends produces 80,000 dog collars each month that give off a fresh scent to keep your dog smelling clean between baths. Total manufacturing costs are $240,000. Of this amount, $180,000 are variable costs. What are the total production costs when 100,000 collars are produced? (Assume both production levels are in the same relevant range.)

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Quizplus · Accepted Answer

The total production costs increase as production increases, primarily due to variable costs. Fixed costs remain the same ($240,000 - $180,000 = $60,000). The variable cost per unit is $180,000 / 80,000 = $2.25. For 100,000 units, variable costs are 100,000 * $2.25 = $225,000. Adding fixed costs, total costs are $225,000 + $60,000 = $285,000.

Fresh Best Friends Produces 80,000 Dog Collars Each Month That