nits are produced variable costs are 40 per unit and total c

nits are produced variable costs are $40 per unit and total costs are $720,000. What are the total costs when 20,000 are produced? Multiple Choice $720,000. $920,000. $880,000 None of the answers is correct.

Solution

Total cost =Variable cost+Fixed cost

Hence Fixed cost at 15000 units=720,000-(15000*40)

=$120,000

Hence total cost at 20000 units

=(20000*40)+$120,000

which is equal to

=$920,000

Hence the correct option is B.

NOTE:Total fixed costs and variable cost/unit do not change with change in units.