If fixed costs are 5000 and variable cost per unit is 2, and 4000 units are produced, total costs equal:

• A. 12000
• B. 13000
• C. 14000
• D. 15000

Answer: (B)

Understanding how fixed and variable costs combine to form total cost. Fixed costs stay the same no matter how much you produce, while variable costs rise with each unit you make. In this situation, fixed costs are 5,000. The variable cost per unit is 2, so producing 4,000 units adds 2 × 4,000 = 8,000 to costs. Add the fixed and variable portions together: 5,000 + 8,000 = 13,000. So total costs are 13,000, which matches the correct option. This illustrates how the total cost line has a constant fixed base with a slope equal to the variable cost per unit. If production changes, only the variable portion changes, while the fixed portion stays the same.