Campus Dining Services at UB is planning on adding a line of UB branded chocolat

Question

Campus Dining Services at UB is planning on adding a line of UB branded chocolates that it will sell in each of its campus locations. The first product in this line is a mint chocolate candy bar. The equipment necessary to manufacture this new candy bar will cost $300,000 per year. Each candy bar will require $0.19 in chocolate, $0.04 in sugar, and $0.03 of mint flavoring. The new line requires one operator (labor rate $10.75 per hour) and can manufacture 85 candy bars per hour. What are the total fixed costs associated with the production of mint chocolate candy bars?

Explanation / Answer

Ans:

Total fixed cost = $300,000

A fixed cost is a cost which does not change with the change in the amount of goods or services produced.In this case the cost incurred to purchase manufacturing equipment is fixed cost.Hence total fixed cost is $300,000.

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