A manufacturer of small glass figurines?
A manufacturer of small glass figurines discovers that it costs $ 1500 for a production run of 1800 and $ 1600 for a production run of 2000 . Assuming that cost is a linear function of the number of items, find the overhead and the marginal cost of a figurine.
The overhead is $ .
the marginal cost of a figurine is $ .
PassionForDance
on February 8th, 2012
total cost = overhead + # units * production cost/unit
let
c = production cost per unit
h = overhead cost
…it costs $ 1500 for a production run of 1800…
1500 = h + 1800c (eq 1)
…$ 1600 for a production run of 2000…
1600 = h + 2000c
h = 1600 – 2000c (eq 2)
plug eq 2 into eq 1
1500 = h + 1800c
1500 = 1600 – 2000c + 1800c
2000c – 1800c = 1600 – 1500
200c = 100
c = 100/200
c = 0.50
plug this into eq 2:
h = 1600 – 2000c
h = 1600 – 2000*0.50
h = 1600 – 1000
h = 600