A company sells its product for $79. The company has marginal costs of $37 and annual fixed costs of $95,000. What is the annual total cost to produce 8,500 units of its product?
$409,500
To find the annual total cost to produce 8,500 units of the product, we need to consider both the fixed costs and the variable costs.
Fixed costs are costs that do not change based on the level of production. In this case, the annual fixed costs are $95,000.
Variable costs are costs that vary based on the level of production. The marginal cost is the cost incurred to produce one additional unit of the product. In this case, the marginal cost is $37.
To calculate the total variable costs, we can multiply the marginal cost by the number of units produced:
Total Variable Costs = Marginal Cost per unit * Number of units produced
Total Variable Costs = $37 * 8,500
Total Variable Costs = $314,500
Finally, we can calculate the annual total cost by adding the fixed costs to the total variable costs:
Annual Total Cost = Fixed Costs + Total Variable Costs
Annual Total Cost = $95,000 + $314,500
Annual Total Cost = $409,500
Therefore, the annual total cost to produce 8,500 units of the product is $409,500.