Farris Billiard Supply sells all types of billiard equipment

Farris Billiard Supply sells all types of billiard equipment, and is considering manufacturing their own brand of pool cues. Mysti Farris, the production manager, is currently investigating the production of a standard house pool cue that should be very popular. Upon analyzing the costs, Mysti determines that the materials and labor cost for each cue is $25, and the fixed cost that must be covered is $2,400 per week.If Mysti sells 20 cues, her total variable cost will be _________.

A. 500

B. 1500

C. 2000

D. 1000

Solution

Variable Costs are those which vary with the production quantity of cues. Hence, material and labour costs are variable costs and the same is $ 25 per cue. Number of cues manufactured (assumed to be equal to number sold) = 20

Total Variable Cost = 25 x 20 = $ 500

Hence, the correct option is (A).