Determining the total costs for a given level of activity Let us assume that Lambchops is expecting.

Determining the total costs for a given level of activity
Let us assume that Lambchops is expecting to produce and sell 1000 bales of
processed wool. What are the expected total financial costs? Now that we know
the variable and fixed costs, we can use a formula to calculate how the
financial costs will change as production changes: Total financial cost = Fixed
costs + (variable cost per unit of output × level of output) In Lambchops’
case, this will equate to: $297500 + ($650 × 1000) = $947500 What is the
expected profit? We know the costs that will be generated for the volume of
activity,

Determining the total costs for a given level of activity
Let us assume that Lambchops is expecting to produce and sell 1000 bales of
processed wool. What are the expected total financial costs? Now that we know
the variable and fixed costs, we can use a formula to calculate how the
financial costs will change as production changes: Total financial cost = Fixed
costs + (variable cost per unit of output × level of output) In Lambchops’
case, this will equate to: $297500 + ($650 × 1000) = $947500 What is the
expected profit? We know the costs that will be generated for the volume of
activity, and we know the revenue, so what we are now doing is commonly referred
to as cost-volume-profit analysis. The costs and profit for the production and
sale of 1000 bales of wool are as follows: