Let's try to determine the cost function for another company like ABC who makes sausages. Assume costs are as follows: Monthly depreciation on buildings and equipment is $17,285 Product costs are $1 per pound produced Wages are $2.68 per pound produced Supervisory Salaries total $13,068 per month Utilities cost $3,178 per month plus $.20 per pound produced. What is the variable cost portion of their cost formula

Question

Business

Miranda Fry

1 June, 18:28

Let's try to determine the cost function for another company like ABC who makes sausages. Assume costs are as follows: Monthly depreciation on buildings and equipment is $17,285 Product costs are $1 per pound produced Wages are $2.68 per pound produced Supervisory Salaries total $13,068 per month Utilities cost $3,178 per month plus $.20 per pound produced. What is the variable cost portion of their cost formula

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Answers (1)

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Boris · Answer 1

the variable cost portion is 3.88 per pound

Explanation:

the cost function equations is total production cost = total fixed cost + variable cost. In this case we have to remove all the fixed cost and selling & administrative expenses or just sum up the variable cost

Product cost + utilities cost variable + wages = 1+0.2+2.68.

Just to clarify when wages are related people in the nonmanufacturing funtions such as selling and general administrative. Those charges are reported directly on the income statement as expenses rather than cost