Question

Doggie Pals produces 100,000 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, $150,000 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.)
A) $187,500

B) $250,000

C) $387,500

D) $237,500

Answer 1

Answer:

The correct answer is D.

Explanation:

Giving the following information:

Doggie Pals produces 100,000 dog collars each month. Total manufacturing costs are $200,000. Of this amount, $150,000 are variable costs. What are the total production costs when 125,000 collars are produced.

First, we need to calculate the unitary variable cost:

Unitary VC= Total VC/ units produced= 150,000/100,000= $1.5

Total production costs= 1.5*125,000 + 50,000= $237,500