Lee Hardware produces bins. Each bin sells for $16. Information for June appears below. Which of the following represents Lee's cost equation?
A) Y = $16.00X + $28,728
B) Y = $4.40X + $28,728
C) Y = $6.84X + $18,480
D) Y = $4.40X + $18,480

Question

Lee Hardware produces bins. Each bin sells for $16. Information for June appears below.  Which of the following represents Lee's cost equation?
A) Y = $16.00X + $28,728 
B) Y = $4.40X + $28,728 
C) Y = $6.84X + $18,480 
D) Y = $4.40X + $18,480

Quizplus · Accepted Answer

Units Sold = Sales Revenue ÷ Unit Selling Price = $67,200 ÷ $16 = 4,200 units; Unit variable cost = Total variable costs ÷ Units sold = $18,480 ÷ 4,200 = $4.40. The cost equation is the total costs = (Unit Variable cost * X) + Total Fixed Costs = $4.40X + $28,728.

Lee Hardware Produces Bins