Asked by Nazwa Al-Sayeed on Jul 22, 2024
Verified
(Table: Cakes) Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 1 mixer and bakes 400 cakes per day,what is her average fixed cost?
A) $0.025
B) $2.50
C) $1,000
D) $400,000
Average Fixed Cost
The fixed costs (those not varying with output) of production divided by the quantity of output produced.
Mixers
Devices or social events that are designed to combine different ingredients or allow people to meet and interact.
Bakes
Refers to food items that are cooked through baking, a method of cooking food using prolonged dry heat, often in an oven.
- Review and determine the mean fixed, variable, and complete costs.
- Investigate the relationship between production output and cost implications.
Verified Answer
RJ
Ryley JohnsonJul 26, 2024
Final Answer :
B
Explanation :
Average fixed cost is the fixed cost per unit of output. In this case, if Pat purchases 1 mixer and bakes 400 cakes per day, her estimated fixed cost is $1,000. Therefore, her average fixed cost is:
Avg. Fixed Cost = Fixed Cost / Quantity of output
Avg. Fixed Cost = $1,000 / 400 = $2.50 per cake. Therefore, the best choice for Pat would be to purchase 1 mixer.
Avg. Fixed Cost = Fixed Cost / Quantity of output
Avg. Fixed Cost = $1,000 / 400 = $2.50 per cake. Therefore, the best choice for Pat would be to purchase 1 mixer.
Learning Objectives
- Review and determine the mean fixed, variable, and complete costs.
- Investigate the relationship between production output and cost implications.