Asked by Canon Graef on Jul 12, 2024
Verified
Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total variable costs?
A) $1000
B) $3000
C) $5,000
D) $7,000
Variable Costs
Costs that change in proportion to the volume of goods or services produced.
Accounting Profit
The financial gain calculated by subtracting total expenses from total revenues, as per accepted accounting principles.
Units
Basic quantities or measurements, used as standards for expressing and comparing quantities.
- Ascertain the total variable expenses by taking into account the unit variable costs and the quantity produced.
Verified Answer
MM
Marcel MansurJul 17, 2024
Final Answer :
B
Explanation :
To find the variable costs, we can use the following formula:
Total Revenue - Total Variable Costs - Total Fixed Costs = Accounting Profit
We know that the firm is making an accounting profit of $3000, selling 1000 units at $15 each. Therefore, the total revenue is:
$15 x 1000 units = $15,000
Plugging this into the formula, we get:
$15,000 - Total Variable Costs - Total Fixed Costs = $3000
We can simplify this to:
Total Variable Costs + Total Fixed Costs = $12,000
We don't have information about the total fixed costs, but we know that the variable costs are $3 per unit. So, the total variable costs for 1000 units is:
Total Variable Costs = $3 x 1000 units = $3000
Therefore, the answer is B, $3000.
Total Revenue - Total Variable Costs - Total Fixed Costs = Accounting Profit
We know that the firm is making an accounting profit of $3000, selling 1000 units at $15 each. Therefore, the total revenue is:
$15 x 1000 units = $15,000
Plugging this into the formula, we get:
$15,000 - Total Variable Costs - Total Fixed Costs = $3000
We can simplify this to:
Total Variable Costs + Total Fixed Costs = $12,000
We don't have information about the total fixed costs, but we know that the variable costs are $3 per unit. So, the total variable costs for 1000 units is:
Total Variable Costs = $3 x 1000 units = $3000
Therefore, the answer is B, $3000.
Learning Objectives
- Ascertain the total variable expenses by taking into account the unit variable costs and the quantity produced.
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