Question

Doggie Pals produces​ 110,000 dog collars each month that give off a fresh scent to keep your dog smelling clean between baths. Total manufacturing costs are​ $200,000. Of this​ amount, $100,000 are variable costs. What are the total production costs when​ 125,000 collars are​ produced? (Assume both production levels are in the same relevant​ range.)

Answer 1

Answer:

$213,636.36

Explanation:

The fixed cost is usually the same for a range of activity levels while the variable cost changes as the number of units produced or activity level changes.

Given that at a level of 110,000 dog collars, $100,000 are variable costs. Then

Variable cost per dog collar = $100,000/110,000

= $0.91

Fixed cost  = $200000 - $100000

= $100,000

Where 125,000 collars are​ produced,

Total production cost = $100,000 + (125,000 × 0.91)

= $213,636.36