Question

Lorberg Company produces a variety of products, including some that require the use of a specialized forming machine. Lorberg can rent forming machines for $10,000 per year. Each machine can produce as many as 20,000 units per year.

Required

1. Prepare a table that shows the total cost of forming equipment rental and unit cost for units ranging from 0 to 50,000, using increments of 10,000 units.

2. How would you describe the behavior of the forming equipment rental cost?

Answer 1

Answer 1

Units	Cost
0	0
10,000	$ 10,000
20,000	$ 10,000
30,000	$ 20,000
40,000	$ 20,000
50,000	$ 30,000

Answer 2

Equipment rental cost is a STEP COST.

This is because it swill reami same for units 1 to 20,000 and 20,001 to 40,000 and so on.

Its graph is like:

Cost (Dollars) Volume