Total costs are $180,000 when 10,000 units are produced; of this amount, variable costs are $64,000.

What are the total costs when 13,000 units are produced?

a. $199,200.

b.$214,800.

c.$234,000.

d. Some other amount.

e. Total costs cannot be calculated based on the information presented.

Option (a) is correct.

Explanation:

At production level of 10,000 units,

Total cost = $180,000

Variable costs = $64,000

Fixed cost = Total cost - Variable cost

= $180,000 - $64,000

= $116,000

Therefore,

Variable cost per unit = Variable cost : No. of units

= $64,000 : 10,000

= $6.4

Therefore, at the production level of 13,000 units,

Total costs:

= Fixed cost + Variable cost

= $116,000 + ($6.4 * 13,000)

= $116,000 + $83,200

= $199,200