Asked by Benoit Chenou on May 01, 2024
Verified
Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total costs?
A) $10,000
B) $11,000
C) $12,000
D) $13,000
Total Costs
The sum of all expenses incurred in the production of goods or services, including fixed and variable costs.
Variable Costs
Costs that vary directly with the level of production or output, for example, materials and labor costs used in manufacturing.
Accounting Profit
The net income of a company calculated by deducting all operational and overhead costs from total revenue, according to generally accepted accounting principles.
- Comprehend the structure and computation of overall expenses in a company.
Verified Answer
1000 units × $15 per unit = $15,000
Next, we subtract the variable costs from the total revenue to find the firm's total contribution margin:
$15,000 total revenue - ($3 variable cost per unit × 1000 units) = $12,000 total contribution margin
Finally, we add the total contribution margin to the accounting profit to find the firm's total costs:
$12,000 total contribution margin + $3,000 accounting profit = $15,000 total costs
Therefore, the correct answer is C) $12,000.
Learning Objectives
- Comprehend the structure and computation of overall expenses in a company.
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