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A factory produces 3 varieties of fountain pens.

- **Type I:** Fixed Cost (F.C.) Rs. 200,000, Variable Cost (V.C.) Rs. 10 per unit
- **Type II:** F.C. Rs. 320,000, V.C. Rs. 8 per unit
- **Type III:** F.C. Rs. 600,000, V.C. (Variable Cost unspecified)

If 5,000 units of Type II fountain pens are produced, what is the total cost of production?

a) Rs. 160,000
b) Rs. 280,000
c) Rs. 360,000
d) Rs. 400,000

Answer :

Final answer:

The total cost of production for 5,000 units of Type II fountain pens is Rs. 360,000, which is the sum of the fixed cost of Rs. 320,000 and the variable cost for 5,000 units (5,000 x Rs. 8/unit = Rs. 40,000). Therefore, the correct answer is c) Rs. 360,000.

Explanation:

If 5,000 units of Type II fountain pens are produced, the total cost of production would be the sum of the fixed cost and the variable cost incurred for producing these units. The fixed cost (F.C.) for Type II is Rs. 320,000. The variable cost (V.C.) is Rs. 8 per unit. To calculate the total variable cost for 5,000 units, we multiply 5,000 by the variable cost per unit.

Total Variable Cost = 5,000 units x Rs. 8/unit = Rs. 40,000

To find the total cost of production for these pens, we add the fixed cost and the total variable cost together:

Total Cost of Production = Fixed Cost + Total Variable Cost

Total Cost of Production = Rs. 320,000 + Rs. 40,000

Total Cost of Production = Rs. 360,000

Therefore, the correct answer is c) Rs. 360,000.

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