Oriole Lobsters traps and packs lobsters and then sells them wholesale to fine restaurants across Canada. The income statement for last year follows:
Revenue (based on sales of 2,000 cases of lobsters) $200,000
Expenses:
Wages for fishermen and packers $90,000
Packing materials 22,000
Rent and insurance 26,000
Administrative and selling 44,000
182,000
Pretax income 18,000
Taxes (20%) 3,600
After-tax income $14,400
Fishermen and packers are employed on an hourly basis and can be laid off whenever necessary. Sales people mostly deliver the product and are paid on a salaried basis; their salaries are included in administrative and selling expenses.
(a) Estimate the cost function for Oriole Lobsters. (Round variable cost per unit to 2 decimal places, e.g. 15.25.)
Cost function: Total Cost = $ + $ × Quantity