Question

Assume your company sell 1,000 widgets at a variable cost of $5 per widget, and $5,000 per month in fixed costs. Using the relevant range assumption, how much would you add to your variable costs if you sell 5,000 widgets.?

Answer 1

Answer:

$20,000

Step-by-step explanation:

It is given that a company sell 1,000 widgets.

Variable cost = $5 per widget

Fixed cost = $5,000 per month

Using the relevant range assumption we need to find the increase in variable costs if you sell 5,000 widgets.

Variable cost 1,000 widgets = 1,000×5 = $5,000

Variable cost 5,000 widgets = 5,000×5 = $25,000

Increase in widgets = $25,000 - $5,000 = $20,000

Therefore, we need to add $20,000 in variable cost, if we sell 5,000 widgets.

Answer 2

Step-by-step explanation:

It is given that a company sell 1,000 widgets.

Variable cost = $5 per widget

Fixed cost = $5,000 per month

Using the relevant range assumption we need to find the increase in variable costs if you sell 5,000 widgets.

Variable cost 1,000 widgets = 1,000×5 = $5,000

Variable cost 5,000 widgets = 5,000×5 = $25,000

Increase in widgets = $25,000 - $5,000 = $20,000

Therefore, we need to add $20,000 in variable cost, if we sell 5,000 widgets