Question

A company has 1,000 units of production. $80,000 is incurred for total products, but $30,000 is considered variable costs. If the production cost is $1,200, what’s the total production cost?

Answer 1

Variable cost per unit = Total variable cost / Number of units produced

Variable cost per unit = $ 30,000 / 1,000 = $ 30

Total Fixed cost = Total Production costs - Total variable cost

Total Fixed cost = $ 80,000 - $ 30,000 = $ 50,000

Fixed cost remains same and not altered with the variability of units of production up-to a certain limit .

If, the production units is 1,200 then total production costs = [ Variable cost per unit X 1,200 units ] + $ 50,000

Total Production costs = [ $ 30 X 1,200] + $ 50,000

Total Production costs = $ 36,000 + 50,000 = $ 86,000

Note : In the question it is written, production cost is $ 1,200, it should be like production units is 1,200.

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