Question

The cost components of a heater include $38 for the compressor, $14 for the sheet molded compound frame, and $70 per unit for assembly. The factory machines and tools cost is $53,000. The company expects to produce 1,400 heaters in the coming year. What cost function best represents these costs

Answer 1

Answer: y = 122x + 53,000

Explanation:

The cost function takes the form, y = mx + c

Y = total cost

m would be the variable cost because it is the increase in x

x = total number of units to be produced

c = fixed cost because this is the y intercept and represents an amount that will not change regardless of the change in x

Variable cost = compressor + compound frame + assembly

= 38 + 14 + 70

= $122

Fixed cost = $53,000

Cost function is:

y = 122x + 53,000