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# Computing Fixed, Variable, and Total Unit Costs

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Calwood Manufacturing anticipates producing 1,450 wagons with total budgeted costs of \$18,824. Of this amount, \$5,600 is considered to be fixed.

A. Write the cost equation in standard form.
B. If Calwood produces 1,400 wagons, how much are total fixed costs?
C. If Calwood produces 1,460 wagons, how much are total fixed costs?
D. How much is variable cost per wagon if 1,400 wagons are produced and sold?
E. How much is total variable cost if 1,400 wagons are produced and sold?
F. If 1,520 wagons are produced and sold, what is the expected total cost?
G. If the company produces and sells 1,520 wagons, what is the unit cost of each wagon?
H. What if the company produces and sells 1,700 wagons, what happens to the unit cost of each wagon compared to the unit cost in part G?

#### Solution Preview

A. Write the cost equation in standard form.
Total costs = Total fixed costs + Total variable costs
\$18,824 = \$5,600 + Total variable costs
Total variable costs = \$13,224
Total wagons = 1,450
Wagon variable cost = \$13,224/1,450 = \$9.12

Total cost = Total fixed cost + (Wagon variable cost * number of units)
Total cost = \$5,600 + \$9.12x

B. If Calwood produces 1,400 wagons, how much are total fixed costs?
Assuming that 1,400 wagons and ...

#### Solution Summary

This solution illustrates how to compute the cost equation for a product, as well as how to compute the unit and total variable costs of producing it, the fixed cost of producing it, and the total unit cost of producing it.

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