Question

The estimated material cost given in the table titled "Variable Cost Estimated of Mulchand textiles "included the cost of material that gets spoiled in the production process. Mr. Shama decomposed the estimated material cost into material spoilage cost and material usage cost, but he lost the data when his computer crashed. When he saw the following line diagram, he recalled that he measured the estimate of material spoilage cost per square feet of output on the y-axis and yearly output on the x-axis, then what will be the estimated material usage cost per square feet of output?

Estimated material usage cost per square feet of output

• A. Decrease up to 125000 square feet of yearly output and then increases monotonically.
• B. Decreases up to 50000 square feet of yearly output, remians constant between 50000 and 100000, decreases between 100000 and 125000, remains constant between 125000 and 175000 and finally increases between 175000 and 200000 of yearly output.
• C. Remains constant for all levels of yearly output.
• D. Increases up to 50000 square feet of yearly output, remains constant between 50000 and 100000, increases between 100000 and 125000, remains constant between 125000 and 175000 and finally decreases between 175000 and 200000 of yearly output.

Answer 1

The correct option is C

Remains constant for all levels of yearly output.

Consider the following table.
$\begin{array}{cccccc}Output& Material& SpoilageCost& Spoilage& Usage& UsageCost\\ & Cost& persq.ft.& & Cost& persq.ft.\\ 25000& 11050& 0.042& 1050& 10000& 0.4\\ 50000& 22000& 0.04& 2000& 20000& 0.4\\ 75000& 33000& 0.04& 3000& 30000& 0.4\\ 100000& 44000& 0.04& 4000& 40000& 0.4\\ 125000& 54750& 0.038& 4750& 50000& 0.4\\ 150000& 65700& 0.038& 5700& 60000& 0.4\\ 175000& 76650& 0.038& 6650& 70000& 0.4\\ 200000& 88000& 0.04& 8000& 80000& 0.4\end{array}$
It is clear from the table that the estimated cost of material usage per square feet of output remains constant for all levels of yearly output.