Maryland Incorporated produces toys. Total manufacturing costs are $360,000 when 50,000 toys are produced. Of this amount, total variable costs are $140,000. What are the total production costs when 85,000 toys are produced? (Assume the same relevant range for both production levels.)

$458,000        

Explanation:The computation of the total production cost in case of 85,000 toys are produced

The fixed cost is

= Total manufacturing cost - total variable cost

= $360,000 - $140,000

= $220,000

And, the variable cost per unit is

= $140,000 ÷ 50,000 toys

= $2.8

So for 85,000 toys, the total production cost is

 = Fixed cost + Variable cost × variable cost per unit

= $220,000 + 85,000 toys × $2.8

= $220,000 + $238,000

= $458,000