Board Games, Inc. makes board games. The following data pertains to the last six months: Based on this data, what is the linear cost equation?
A)y = $5.02X + $36,860
B)y = $0.24X + $156,500
C)y = $4.50X + $50,000
D)Cannot be determined from information given.

Question

Board Games, Inc. makes board games. The following data pertains to the last six months:  Based on this data, what is the linear cost equation?
A)y = $5.02X + $36,860 
B)y = $0.24X + $156,500 
C)y = $4.50X + $50,000 
D)Cannot be determined from information given.

Quizplus · Accepted Answer

The linear cost equation is of the form y = mx + b, where m is the slope (cost per unit) and b is the y-intercept (fixed cost). Using the data given, we can calculate the slope and y-intercept as follows:

m = (total cost for all months - fixed cost) / total units produced
m = ($274,000 - $50,000) / 54,000
m = $4.50 per unit

b = total cost for all months - (slope x total units produced)
b = $274,000 - ($4.50 x 54,000)
b = $50,000

Therefore, the linear cost equation is y = $4.50X + $50,000.