Killy’s Baskets has the following current year costs:
Variable costs ......... $6 per unit
Fixed costs ........... $7,000
Killy and a key supplier have entered into an arrangement that will result in a per unit decrease in Killy’s variable cost of $0.50 next year. Rental space will also be reduced, thereby decreasing fixed costs by 10 percent.

Required
A. If the company makes these changes, what is the new cost equation?
B. Given the new cost equation, determine estimated total costs if production remains at 12,000 units.