Question

The total cost function of ABC Co. is TC= 200x + 5.400.000 (x = Annual production)

Calculate the production unit while the unit cost is $ 500 in October.

Answer 1

Given, Total cost function TC =200x +5,400,000

Where x= Annual Production

Given, Unit cost =$500

Unit cost = Variable cost per unit+ Fixed cost per unit

Varible cost =$200

Then fixed cost per unit =$500-$200 =$300

Given fixed cost =$5,400,000

Fixed cost / Fixed cost per unit =$5,400,000/$300

=18,000 units

Substitute in Total cost function =$200×18,000 +$5,400,000

Total cost=$9,000,000

Given unit cost =$500

Then , Annual Production =$9,000,000/$500 =18,000 units

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