Polka King Gifts had the following costs in March when 400 ceramic statues were produced: materials, $4,200; hourly labor, $1,600; depreciation, $800; rent, $700; and other ﬁxed costs, $500.If the production level changes to 500 units, how much will the total costs be?
A)$9,750
B)$7,800
C)$9,250
D)$1,950
E)None of these answer choices is correct.

Question

Quizplus · Accepted Answer

First, we need to find the total costs when 400 units were produced:
Total costs = materials + hourly labor + depreciation + rent + other fixed costs 
Total costs = $4,200 + $1,600 + $800 + $700 + $500 
Total costs = $7,800

To calculate the total costs when 500 units are produced, we need to use the concept of economies of scale. This means that as production increases, the average cost per unit decreases. To calculate the new total cost, we need to find the cost per unit first:

Cost per unit = Total costs / Number of units produced 
Cost per unit = $7,800 / 400 
Cost per unit = $19.50

Now we can use the cost per unit to calculate the new total cost:

New total cost = Cost per unit x Number of units produced 
New total cost = $19.50 x 500 
New total cost = $9,750

Therefore, the answer is C) $9,250.

Polka King Gifts Had the Following Costs in March When