When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000. What are the total costs when 8,000 units are produced?
A) $200,000.
B) $305,000.
C) $240,000.
D) None of the answers is correct.
E) Total costs cannot be calculated based on the information presented.

Question

Quizplus · Accepted Answer

Total costs include both variable and fixed costs. At 5,000 units, the total variable costs are $35 * 5,000 = $175,000. Since the total costs at this level are $200,000, the fixed costs are $200,000 - $175,000 = $25,000. When producing 8,000 units, the total variable costs are $35 * 8,000 = $280,000. Adding the fixed costs of $25,000, the total costs are $280,000 + $25,000 = $305,000.

When 5,000 Units Are Produced Variable Costs Are $35 Per