Question

1. Test Company derived the following cost function for the production of its product.

Cost = $16,000 + $10X, where x is the number of units.

Next month, Test Company expects to produce 4,000 units.

Determine the total cost to produce 4,000 units.

2. Determine the total variable cost to produce 4,000 units.

3. Determine the total fixed cost to produce 4,000 units.

4. Determine the variable cost per unit to produce 4,000 units.

5. Determine the fixed cost per unit to produce 4,000 units.

Note: Give your answer using dollar signs and commas but no decimal points (cents).

Example: $12,345

Answer 1

Solution

Cost = $16000 + $10X where X is number of units
X = 4000 units (Test Company produces 4000 units)
1	Total Costs
	$16000 + $10*4000
	$56,000
2	Total Variable Costs
	Total Cost - Fixed Costs
	$56000 - $16000
	$40,000
3	Fixed Costs
	$16,000
4	Variable Cost per unit
	$40000 / $4000
	$10 per unit
5	Fixed Cost per unit
	$16000/4000
	$4 per unit