produce an iden- A manufacturing company owns two Plants, A and B, that tical pr

Question

produce an iden- A manufacturing company owns two Plants, A and B, that tical product. The capacity of Plant A is 65,000 units annually while that of Plant B is 85,000 units. The annual fixed cost of Plant A is $260,000 per year and the variable cost is $3.20 per unit. The corresponding values for Plant B are $280,000 and $3.90 per unit. At present, Plant A is being operated at 35% of capacity and Plant B at 40% of capacity. a. What are the average unit costs of production of Plant A and Plant B? 19. Answer: $14.63; $12.14 What are the total cost and the average cost of the total output of both plants? What would be the total cost to the company and the average unit cost if all production were transferred to Plant A? What would be the total cost to the company and the average unit cost if all production were transferred to Plant B? b. c. d.

Explanation / Answer

Question - a

Question - b

Question - c

Total production = 22750 + 34000 = 56750

Question - d

Plant - A Plant - B Total capacity 65000 85000 Capacity used 35% 40% Units produced 22750 34000 Variable cost per unit 3.2 3.9 Total variable cost 72800 132600 Fixed cost 260000 280000 Total cost 332800 412600 Average cost per Unit 14.63 12.14

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