# 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: