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Sabina and Associates: Equation to predict costs? What will

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Sabina and Associates has the following current year costs:

Variable costs $4 per unit
Fixed costs $20,000

Next year, the company plans to enter into an arrangement with a supplier that will result in a 15% decrease in variable costs. They also plan on reducing their rental space, which will decrease fixed costs by 10%.

Required:

A. What will be the new equation to predict total costs?
B. If next year's production is expected to be 10,000 units, what will be total estimated costs?

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Solution Summary

Your tutorial is in Excel, attached. The formula is mapped out. Click in cells to see the calculation.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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