$ 2200 for a production run of 1700 . Assuming that cost is a linear function of the number of items, find the overhead and the marginal cost of a figurine.
I don't know what to do, I did (2200-2000)/300, and got 2/3, but I don't know how to use that...please help
I don't know what to do, I did (2200-2000)/300, and got 2/3, but I don't know how to use that...please help
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Think of it as a series of equations. Let x be the fixed amount (overhead) and y be the variable amount (cost to produce each figurine).
total cost = fixed amount + (number of figures * marginal cost)
We have two equations:
2000 = x + 1400y
2200 = x + 1700y
We can rewrite these respectively as
x = -1400y + 2000
x = -1700y + 2200
Since x will equal itself, these two expressions will also be equal. So
-1400y + 2000 = -1700y + 2200
Add 1700y to both sides.
300y + 2000 = 2200
Subtract 2000 from each side.
300y = 200
y = 2/3
So each figurine costs 2/3 of a dollar, or about $0.67 (rounded). That's the marginal cost. Now we can plug that into either of our equations and solve for x, the fixed overhead. Let's use the first, though either will work.
2000 = x + 1400y
2000 = x + 1400(2/3)
2000 = x + 2800/3
6000/3 = x + 2800/3
3200/3 = x
$1066.67 (rounded) = x
That's the fixed overhead cost.
total cost = fixed amount + (number of figures * marginal cost)
We have two equations:
2000 = x + 1400y
2200 = x + 1700y
We can rewrite these respectively as
x = -1400y + 2000
x = -1700y + 2200
Since x will equal itself, these two expressions will also be equal. So
-1400y + 2000 = -1700y + 2200
Add 1700y to both sides.
300y + 2000 = 2200
Subtract 2000 from each side.
300y = 200
y = 2/3
So each figurine costs 2/3 of a dollar, or about $0.67 (rounded). That's the marginal cost. Now we can plug that into either of our equations and solve for x, the fixed overhead. Let's use the first, though either will work.
2000 = x + 1400y
2000 = x + 1400(2/3)
2000 = x + 2800/3
6000/3 = x + 2800/3
3200/3 = x
$1066.67 (rounded) = x
That's the fixed overhead cost.