Total Fixed Costs Are $25,000 Per Year

Essay

Total fixed costs are $25,000 per year. The variable cost per unit is $10 per unit up to 5,000 units per year and $7.50 per unit thereafter.
a)Develop a cost function for this cost.
b)What could cause the change in variable costs shown above? Explain.
c)List three assumptions that are made when developing these types of cost functions and give one reason that each assumption might not hold.