Question

Fixed Cost Analysis In deciding whether to set up a new manufacturing plant, company analysts have decided that a linear function is a reasonable estimation for the total cost Clx) in dollars to produce x items. They estimate the cost to produce 1,000 items/day as $54,746, and the cost to produce 5,000 items/day as $73,717. Find the foxed cost of production (Round to two decimal places)

Answer 1

Solution-

Variable cost per unit=($73,717-$54,746)/(5000-1000)=$4.74275

Fixed cost=$54,746-1000*$4.74275

=$50003.25

So the fixed cost of Production is $50003.25