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Compute the Total Cost Function and Total Cost for the Month

3-39 Account Analysis

Custom Computers is a company started by two engineering students to assemble and market personal computers to faculty and students. The company operates out of the garage of one of the students' homes. From the following costs of a recent month, compute the total cost function and total cost for the month:

Telephone $ 50, fixed
Utilities 260: fixed, 25% attributable to the garage, 75% to the house
Advertising 75, fixed
Insurance 80, fixed
Materials 7,500, variable, for five computers
Labor 1,800: $1,300 fixed plus $500 for hourly help for assembling five computers

Solution Preview

First, let us divide the costs by type:

Fixed Variable
Telephone $ 50
Utilities 65 ...

Solution Summary

Given a set of fixed and variable costs, this solution illustrates how to build the total cost function formula and how to apply it to find total monthly costs.