Question

Simon Inc. currently produces 110,000 units at a cost of $440,000. The cost is variable. Next year Simon Inc. expects to produce 115,000 units. Simon's relevant range for production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is the expected variable cost

Answer 1

Complete question:

Simon Inc. currently produces 110,000 units at a cost of $440,000. The cost is variable. Next year Simon Inc. expects to produce 115,000 units. Simon's relevant range for production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is the expected variable cost?

A) $420,000

B) $430,000

C) $440,000

D) $460,000

Explanation:

Given ,

Simon Inc. currently produces 110,000 units at a cost of $440,000

Next year Simon Inc. expects to produce 115,000 units

Range for production is 100,000 to 120,000 units.

Now , we need to find out

If 115,000 units are produced next year, then the expected variable cost equation is ,

Variable cost per unit = $\frac{Variable cost}{Unit}$

                                    = $460,000