Question

I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's average fixed cost to produce 9,000 widgets was A. $1.00B. $3.00C. $4.00D. $7.00

Answer 1

Answer:

A.

Explanation:

Total costs are equal to total fixed costs plus total variable costs.

TC = FC + VC

Per unit, the equation is:

Total costs per unit = (total fixed costs / units of production) + unit variable costs.

In this example, the equation is:

TC $36.000 = FC + VC $27.000

$36.000 - $27.000 = FC

$9.000 = FC

FC per unit = FC / units of production

FC per unit = $9.000 / 9.000 units of production

FC per unit = $1