Solution for Problem 1.2.1

Find the total cost of producing x units of radios. The fixed costs are $500 and the cost per unit is $20. How much would it cost to produce 1,000 units? 5,000 units?

Quantities

Step

  • Fixed Costs = 500

  • Cost per Unit = 20

  • Let x = Number of Units

  • Let C = Total Cost

C = 20x + 500

Identify the known quantities.

Identify the unknown quantities.

Create a model (or equation)

Use the Formula

For 1,000 units, let x = 1,000.
C = 20(1,000) + 500 
C = 20,000 + 500 = $20,500

For 5,000 units, let x = 5,000.
C = 20(5,000) + 500 
C = 100,000 + 500 = $100,500