Question

A company sells hand towels at ₹ 100 per unit. The fixed cost for the company to manufacture hand towels is ₹ 35,000 and variable cost is estimated to be 30% of total revenue. What will be the total cost function for manufacturing hand towels?

Options

• 35000 + 3x

• 35000 + 30x

• 35000 + 100x

• 35000 + 10x

Answer 1

35000 + 30x

Explanation:

Here, fixed cost = ₹ 35,000

Total revenue = ₹ 100x, if x units are sold

Variable cost = `30/100` × Revenue

= `30/100 xx 100x`

= 30x

∴ Total cost function = F.C. + V.C.

= 35,000 + 30x