Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5,300 anchors, Sea Side Enterprises average cost per anchor is $54. If $18,000 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, her forecast for 9,000 anchors will be (Round any intermediary calculations to the nearest cent.)

Question

Layne Hanna

Business

18 May, 01:23

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5,300 anchors, Sea Side Enterprises average cost per anchor is $54. If $18,000 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, her forecast for 9,000 anchors will be (Round any intermediary calculations to the nearest cent.)

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Alison · Answer 1

The total cost at 9000 anchor is $473400

Explanation:

To come up with the cost equation used by the manager, we need to find the variable cost per unit.

The total cost at production level of 5300 is = 5300 * 54 = $286200

Out of the total costs, $18000 are fixed.

Thus, variable costs at production of 5300 is = 286200 - 18000 = $268200

The variable cost per unit is = 268200 / 5300 = $50.60

Let x be the number of anchors produced.

The cost equation is = 18000 + 50.60x

At 9000 anchors, the total cost will be,

Total cost = 18000 + 50.60 * (9000) = $473400