Question

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of​ 5,300 anchors, Sea Side Enterprises average cost per anchor is​ $54. If​ $18,000 of the costs are​ fixed, and the plant manager uses the cost equation to predict total​ costs, her forecast for​ 9,000 anchors will be​ (Round any intermediary calculations to the nearest​ cent.)

Answer 1

Answer:

The total cost at 9000 anchor is $473400

Explanation:

To come up with the cost equation used by the manager, we need to find the variable cost per unit.

The total cost at production level of 5300 is = 5300 * 54 = $286200

Out of the total costs, $18000 are fixed.

Thus, variable costs at production of 5300 is = 286200 - 18000 = $268200

The variable cost per unit is = 268200 / 5300 = $50.60

Let x be the number of anchors produced.

The cost equation is = 18000 + 50.60x

At 9000 anchors, the total cost will be,

Total cost = 18000 + 50.60 * (9000)  = $473400