Let's try to determine the cost function for another company like ABC who makes sausages. Assume costs are as follows: Monthly depreciation on buildings and equipment is $17,285 Product costs are $1 per pound produced Wages are $2.68 per pound produced Supervisory Salaries total $13,068 per month Utilities cost $3,178 per month plus $.20 per pound produced. What is the variable cost portion of their cost formula

the cost function equations is total production cost = total fixed cost + variable cost. In this case we have to remove all the fixed cost and selling & administrative expenses or just sum up the variable cost

Product cost + utilities cost variable + wages = 1+0.2+2.68.

Just to clarify when wages are related people in the nonmanufacturing funtions such as selling and general administrative. Those charges are reported directly on the income statement as expenses rather than cost

dubeyshailja64 dubeyshailja64 · Answer 2 · 2022-03-02T10:06:18+01:00

The variable portion of the cost function is 3.88.

What is a cost function?

Cost function determines the minimum cost that would be incurred in the production of a good for some fixed price factors. The cost function can be written as:

[tex]\rm C(x) = FC + V(x)[/tex] , where FC is the fixed cost and V is the variable cost of producing product x.

The variable portion for the given question will be:

[tex]\rm V = Product\: costs+ Wages + Utilities\:cost\\\\\rm V = 1 + 2.68 + 0.20\\\\\rm V = \$3.88[/tex]

Therefore, the variable portion is 3.88.

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