Different processes for making its product process

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Reference no: EM13757512

Jones Company is considering two different processes for making its product Process A has annual fixed cost of $150,000 and variable cost of $15.00 per unit of output. Process B has annual fixed cost of $250,000 and variable cost of $10.00 per unit of output. The company expected to make 15,000 units per year and chose the process with the lowest cost process to make this quantity. However, demand turned out to be 25,000 units per year and therefore production was 25,000 units. How much extra cost did the company incur in producing this quantity because it chose the process that was lowest cost assuming the forecast of 15,000 units was correct?

a. $20,000

b. $21,500

c. $25,000

d. $100,000

Reference no: EM13757512

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