Manufacturing companies usually have two types of costs.
(a) Fixed costs: sometimes called overhead: are costs that are not related to the number of items manufactured. Fixed costs include things like rent: a base level of utilities: and a base level of salaries and must be paid even if the company does not make any products.
(b) Variable costs depend on the number of items manufactured. Variable costs include things like parts and raw materials for the products: higher utilities: and higher salaries.
As a manufacturing company increases the number of items it produces, the fixed costs do not change, but the variable costs increase. One company manufactures high-end racing bicycles. The monthly fixed costs are $2140. The total cost to manufacture 21 bikes is $13480.
Assume that total cost, C, is linearly related to the number of bicycles, x, that the company manufactures.
(A) The cost function is:
(B) The total cost to manufacture 47 bikes is $
(C) The cost to produce each additional bike is $.