Asked by Cardian Williams on May 12, 2024
Verified
Lim Industries has average variable costs of $1 and average total costs of $4 when it produces 900 units of output. The firm's total fixed costs equal
A) $3.
B) $5.
C) $2,700.
D) $3,700.
Total Fixed Costs
The total of all expenses that stay unchanged no matter the amount of production or output.
Average Variable Costs
The variable cost (e.g., labor, raw materials) per unit of output, calculated by dividing total variable costs by the quantity of output produced.
Average Total Costs
The per unit cost of production, calculated by dividing the total cost of production by the number of units produced.
- Ascertain the average of fixed, variable, and total expenses using available data.
- Discern the significance of fixed expenditures in the production landscape and how these costs are divided across output units.
Verified Answer
JH
Jaimy HerreraMay 19, 2024
Final Answer :
C
Explanation :
Total fixed costs can be calculated by subtracting total variable costs from total costs. Average total costs ($4) minus average variable costs ($1) equals $3 per unit. Multiplying this by the number of units (900) gives total fixed costs of $2,700.
Learning Objectives
- Ascertain the average of fixed, variable, and total expenses using available data.
- Discern the significance of fixed expenditures in the production landscape and how these costs are divided across output units.