Asked by Jennifer Vandiver on Jul 12, 2024
Verified
If a firm produces 8 units of output with average fixed cost=$40 and average variable cost=$25,what is its total variable cost?
A) $320
B) $200
C) $650
D) $1,000
Total Variable Cost
The sum of all costs that vary with output level, including costs for raw materials, labor, and utilities that increase or decrease as production volume changes.
Average Fixed Cost
The fixed expenses of a company divided by the number of units produced, showing cost per unit.
Average Variable Cost
Average variable cost is the total variable costs of production divided by the quantity of output produced; it changes with production volume.
- Calculate and perceive the importance of overall average costs, variable average expenses, and fixed expenditures in the context of manufacturing.
Verified Answer
MT
Megha TripathiJul 17, 2024
Final Answer :
B
Explanation :
Average fixed cost is not relevant for determining total variable cost. Total variable cost is equal to the average variable cost multiplied by the quantity produced:
Total variable cost = Average variable cost x Quantity produced
Total variable cost = $25 x 8 = $200
Total variable cost = Average variable cost x Quantity produced
Total variable cost = $25 x 8 = $200
Learning Objectives
- Calculate and perceive the importance of overall average costs, variable average expenses, and fixed expenditures in the context of manufacturing.