1. + -12 points SApCalcBr1 5.1.001 My Notes Ask Your Teacher The table shows the

Question

1. + -12 points SApCalcBr1 5.1.001 My Notes Ask Your Teacher The table shows the marginal cost for a company's product at various production levels. Marginal cost Marginal cost Units ($/unit) Units (/unit) 3.28 2.87 20002.78 2.72 2.54 2.43 2.23 2.19 2.18 2.20 10,000 2.24 2.35 2.67 13,000 2.83 7000 8000 9000 1000 3000 4000 5000 6000 11,000 12,000 (a) Estimate the cost (not including fixed costs) to produce the first 12,000 units by considering batches of 2000 units. Use the initial marginal cost for each batch in your calculations. (b) Use batches of 1000 units and the ending marginal cost for each batch to estimate the cost of raising the production level from 4000 to 11,000 units. Need Help? Read It Talk to a Tutor

Explanation / Answer

a. ) Solution : As for 0 unit marginal cost =3.28,

For 2000 unit marginal cost = 2.78

For 4000 unit marginal cost = 2.54

For 6000 unit marginal cost = 2.23

For 8000 unit marginal cost = 2.18

For 10000 unit marginal cost = 2.24

For 12000 unit marginal cost = 2.67

Thus cost of 12000 unit by the batches of 2000 unit,

Cost = 2000(3.28+2.78+2.54+2.23+2.18+2.24+2.67)

= 2000(17.92)

= $ 35840. Ans.

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b. ) Solution :

Cost = 1000(2.54+2.43+2.23+2.19+2.18+2.20+2.24+2.35+2.67)

=1000(21.03)

=$ 21030 Ans.

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