Asked by Albin Mathew on Jul 28, 2024
Verified
Refer to Scenario 14-2. Suppose the firm is producing 120 units of output and its fixed cost is $950. Then its average variable cost amounts to
A) $7.92.
B) $23.50.
C) $15.58.
D) $1.60.
Average Variable Cost
The total variable costs (costs that change with the amount of output produced) divided by the quantity of output produced.
Fixed Cost
Costs that do not vary with the level of output or activity, such as rent or salaries.
- Comprehend the influence of fixed and variable expenses on an organization's fiscal choices.
Verified Answer
ZK
Zybrea KnightAug 01, 2024
Final Answer :
C
Explanation :
To find the average variable cost (AVC) when producing 120 units, we first calculate the total cost (TC) at 120 units, which is $23.5 * 120 = $2820. Subtracting the fixed cost ($950) from the total cost gives us the total variable cost (TVC) of $1870. Dividing the TVC by the quantity (120 units) gives us the AVC, which is $1870 / 120 = $15.58.
Learning Objectives
- Comprehend the influence of fixed and variable expenses on an organization's fiscal choices.