Linear cost function

Question

The Yumyum Dog Biscuit Company makes dog biscuits and sells them for $8 per box. The fixed costs are $3000 and the cost to produce each box is $6 Determine: a) the linear cost function

Answer 1

Cost function is the fixed costs plus the variable costs times the quantity, or output.

In this case, fixed costs are $3,000 and variable costs are $6 each box.

Total cost function = $3,000 + $6Q

Marginal cost function = $6

You can use this function to find the total cost of producing a certain amount by plugging in a quantity into the function.

If you produce 0 units: TC = $3000 + $6(0) = $3000

If you produce 100 units: TC = $3000 + $6(100) = $3600