Question

A firm is producing 25,000 units of output at a total cost of $933,000. The firm's average variable cost is $32.5 per unit.

What is the firm's total fixed cost and average variable costs?

Answer 1

Total cost = $933,000

Number of units produced = 25000 units

Cost per unit = $933,000/25,000= $37.32

So average cost per unit = $37.32

So average fixed cost per unit = average cost- average variable cost= $37.32-32.5= $4.82

Total Fixed cost = Number of units * average fixed cost

= 25000*$4.82

= $ 120500

total variable cost = numbe rof units * average variable cost

= 25000*32.5

= $812500

Average variable cost is already guven in the question which is $32.5 per unit.

AVerage fixed cost is $4.82

and Average total cost is $37.32