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13 June, 02:05

The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If the fixed cost is $1,200 per week:

A. variable cost is $2,000.

B. average variable cost is $8.

C. total cost is $3,200.

D. average fixed cost is $20.

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Answers (1)
  1. 13 June, 05:15
    0
    Option (B) is correct.

    Explanation:

    Given that,

    Average total cost of producing cell phones = $20

    Current output level = 100 units per week

    Fixed cost = $1,200 per week

    Average total cost = (Variable cost + Fixed cost) : Number of units

    $20 = (Variable cost + $1,200) : 100

    $2,000 = (Variable cost + $1,200)

    $2,000 - $1,200 = Variable cost

    $800 = Variable cost

    Total cost = Variable cost + Fixed cost

    = $800 + $1,200

    = $2,000

    Average variable cost:

    = Variable cost : Number of units

    = $800 : 100

    = $8

    Average Fixed cost:

    = Fixed cost : Number of units

    = $1,200 : 100

    = $12

    Therefore, the correct answer is: Average variable cost is $8.
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Home » Business » The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If the fixed cost is $1,200 per week: A. variable cost is $2,000. B. average variable cost is $8. C. total cost is $3,200. D.
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