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4 June, 20:06

Maryland Incorporated produces toys. Total manufacturing costs are $ 370 comma 000 when 90 comma 000 toys are produced. Of this amount, total variable costs are $ 140 comma 000. What are the total production costs when 105 comma 000 toys are produced? (Assume the same relevant range for both production levels.)

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  1. 4 June, 20:57
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    Total production costs when 105,000 toys are produced = $393,275

    Explanation:

    Provided that total cost of manufacturing 90,000 toys = $370,000

    Out of which variable cost = $140,000

    That means fixed cost = $370,000 - $140,000 = $230,000

    Now variable cost per unit = $140,000/90,000 units = $1.555

    Therefore cost of producing 105,000 toys with same relevant range = $1.555 X 105,000 = $163,275 = Variable Cost

    Note: Fixed cost will remain same as the range of production level is same.

    Therefore fixed cost for producing 105,000 units = $230,000

    Therefore total cost = $163,275 + $230,000 = $393,275
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