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Cost estimate

Thomas produces 110,000 units at a cost of $440,000. Next year, Thomas expects to produce 120,000 units. Thomas relevant range is 100,000 to 120,000 units. If the cost is variable and 120,000 units are produced, the cost will: which one

increase to what, decrease, stay the same, or be indeterminate?

Solution Preview

TC = FC + Q*VC
For this year, 440,000 = FC + 110,000VC
For next year, TC2 = FC + ...

Solution Summary

This provides an example of determining what will happen to costs in the future.