Feathered Nests produces decorative birdhouses. The company's average cost per unit is $20.00 at a production level of 2,000 birdhouses. What is the total cost of producing 2,000 birdhouses?
-If $4,800 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 2,200 birdhouses will be
A) $4,000.
B) $40,000.
C) $43,520.
D) $44,000.

Question

Quizplus · Accepted Answer

Total cost of producing 2,000 birdhouses = 2,000 x $20.00 = $40,000
Using the cost equation: Total cost = Fixed cost + (Variable cost per unit x Quantity produced)
Fixed cost = $4,800
Variable cost per unit = Total cost / Quantity produced = $40,000 / 2,000 = $20.00
Total cost for 2,200 birdhouses = $4,800 + ($20.00 x 2,200) = $43,520
Therefore, the answer is C ($43,520).

Feathered Nests Produces Decorative Birdhouses