Question

At a production level of 2,586 units, a project has total costs of $113,829. The variable cost per unit is $12.48. Assume the firm can increase production by 1,000 units without increasing its fixed costs. What will the total costs be if 5,521 units are produced?

Answer 1

Calculation of total fixed costs

Total Costs = Total Variable costs + Total fixed costs

$113,829 = [2,586 units x $12.48 per unit] + Total fixed costs

$113,829 = $32,273 Total fixed costs

Total fixed costs = $113,829 - $32,273

Total fixed costs = $81,556

Calculation of the total costs if 5,521 units are produced

Total Costs = Total Variable costs + Total fixed costs

= [5,521 units x $12.48 per unit] + $81,556

= $68,902 + $81,556

= $150,458

“Hence, the total costs for producing 5,521 units will be $150,458”