Answer :
Step-by-Step Solution:
1. Identify the costs at different production levels:
- For 10,000 units: The costs are \[tex]$100,000, \$[/tex]40,000, \[tex]$90,000, and \$[/tex]50,000.
- For 30,000 units: The costs are \[tex]$300,000, \$[/tex]240,000, \[tex]$90,000, and \$[/tex]150,000.
2. Understand the concept of variable costs:
- Variable costs change proportionally with the level of production. This means if production increases, the variable cost should increase as well.
3. Compare the costs at 10,000 units and 30,000 units:
- Cost 1:
- At 10,000 units: \[tex]$100,000 - At 30,000 units: \$[/tex]300,000
- The cost changes from \[tex]$100,000 to \$[/tex]300,000 as production triples, indicating this is a variable cost.
- Cost 2:
- At 10,000 units: \[tex]$40,000 - At 30,000 units: \$[/tex]240,000
- The cost changes from \[tex]$40,000 to \$[/tex]240,000, which also suggests a variable cost because it increased significantly with more production.
- Cost 3:
- At 10,000 units: \[tex]$90,000 - At 30,000 units: \$[/tex]90,000
- The cost remains the same despite the increase in production, indicating this is a fixed cost.
- Cost 4:
- At 10,000 units: \[tex]$50,000 - At 30,000 units: \$[/tex]150,000
- The cost changes from \[tex]$50,000 to \$[/tex]150,000, which suggests this is a variable cost as well.
4. Identify the variable costs:
- Based on the comparisons, the costs that vary with production levels are:
- Cost 1 (from \[tex]$100,000 to \$[/tex]300,000)
- Cost 2 (from \[tex]$40,000 to \$[/tex]240,000)
- Cost 4 (from \[tex]$50,000 to \$[/tex]150,000)
The variable costs are 1, 2, and 4. Therefore, the correct answer is:
1) 1 and 2
1. Identify the costs at different production levels:
- For 10,000 units: The costs are \[tex]$100,000, \$[/tex]40,000, \[tex]$90,000, and \$[/tex]50,000.
- For 30,000 units: The costs are \[tex]$300,000, \$[/tex]240,000, \[tex]$90,000, and \$[/tex]150,000.
2. Understand the concept of variable costs:
- Variable costs change proportionally with the level of production. This means if production increases, the variable cost should increase as well.
3. Compare the costs at 10,000 units and 30,000 units:
- Cost 1:
- At 10,000 units: \[tex]$100,000 - At 30,000 units: \$[/tex]300,000
- The cost changes from \[tex]$100,000 to \$[/tex]300,000 as production triples, indicating this is a variable cost.
- Cost 2:
- At 10,000 units: \[tex]$40,000 - At 30,000 units: \$[/tex]240,000
- The cost changes from \[tex]$40,000 to \$[/tex]240,000, which also suggests a variable cost because it increased significantly with more production.
- Cost 3:
- At 10,000 units: \[tex]$90,000 - At 30,000 units: \$[/tex]90,000
- The cost remains the same despite the increase in production, indicating this is a fixed cost.
- Cost 4:
- At 10,000 units: \[tex]$50,000 - At 30,000 units: \$[/tex]150,000
- The cost changes from \[tex]$50,000 to \$[/tex]150,000, which suggests this is a variable cost as well.
4. Identify the variable costs:
- Based on the comparisons, the costs that vary with production levels are:
- Cost 1 (from \[tex]$100,000 to \$[/tex]300,000)
- Cost 2 (from \[tex]$40,000 to \$[/tex]240,000)
- Cost 4 (from \[tex]$50,000 to \$[/tex]150,000)
The variable costs are 1, 2, and 4. Therefore, the correct answer is:
1) 1 and 2
