The variable cost of producing specialty value-added stainlesssteel tubing varies according to the quantity produced per year. The variable cost is $500 per ton from 0 to 700 tons. Above this level, the variable cost is different. At this time, we are producing 600 tons per year, and the average cost per ton is $800. Next year, we anticipate ramping up production to 1,000 tons, and the projected average cost for all 1,000 tons will be $710 per ton. Solve, a. What is the current fixed cost? b. If the fixed cost holds constant next year, what is the variable cost of production for tons above 700 tons?

The variable cost of producing specialty value-added stainlesssteel tubing varies according to the quantity produced per year. The variable cost is $500 per ton from 0 to 700 tons. Above this level, the variable cost is different. At this time, we are producing 600 tons per year, and the average cost per ton is $800. Next year, we anticipate ramping up production to 1,000 tons, and the projected average cost for all 1,000 tons will be $710 per ton. Solve, a. What is the current fixed cost? b. If the fixed cost holds constant next year, what is the variable cost of production for tons above 700 tons?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 1.1CE

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