Lamburgs Incorporated is attempting to predict the impact of a forthcoming environmental regulation on the variable costs associated with one of their merchandise. The legislature is still debating the regulation. There is a 50% chance that the rules will not be ready in time to impact variable costs next year. Lamburgs management anticipates that when the regulation is completed, it will increase variable costs by either 5% or 10%. At the moment, the variable cost of the product is $200 per unit. What is the expected variable cost for Lamburgs' key product next year based on these assumptions?

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Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.