WILKINSON WONKA WORKS Co. The corporate managers of the Wilkinson Wonka Works Company needs your help. They have decided to manufacture and sell their infamous "wonkas". From their estimates, they can produce 10,000 items for $547,500 and 60,000 items for $737,500. They have determined the best fit for determining the cost of production will be linear. a) Determine the marginal cost of production. b) Determine the fixed cost of production. c) Write the cost function of production C(x). d) If the initial budget for production is $1,100,001 determine the number of wonkas the company can produce. e) If the company decides to sell each wonka for $7.80, find the number of wonkas that must be produced and sold to break-even.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
How would I solve for marginal cost when given two x?
As you can see in the question it states "they can produce 10,000 items for $547,500 and 60,000 items for $737,500", how would I go about solving the problem when given two slopes?
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