In a slow year, Deutsche Burgers will produce 2 million hamburgers at a total cost of...

In a slow year, Deutsche Burgers will produce 2 million hamburgers at a total cost of $3.5 million. In a good year, it can produce 4 million hamburgers at a total cost of $4.5 million.

What are the fixed costs of hamburger production? (Enter your answer in millions rounded to 1 decimal place.)
What are the variable costs when the firm produces 2 million hamburgers? (Enter your answer in millions.)
What is the average cost per burger when the firm produces 1 million hamburgers? (Round your answer to 2 decimal places.)
What is the average cost when the firm produces 2 million hamburgers?

Solutions

Expert Solution

a. Fixed Cost+2*Variable Cost =3.5
Fixed Cost+4*Variable Cost =4.5
2*Fixed Cost -Fixed Cos =2*3.5-4.5 =2.5 million

b. Variable Cost =(3.5-2.5)/2 =0.5 million

c. Average Cost when 1 million hamburgers are produced =(Fixed Cost+1*Variable Cost)/1 =2.5+0.5 =3.00

d. Average Cost when 2 million hamburgers are produced =(Fixed Cost+2*Variable Cost)/2 =(2.5+2*0.5)/2 =1.75 million

jeff jeffy answered 1 year ago

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