Question
In: Accounting
If costs are represented by the formula TC = a + bX, “b” is:
If costs are represented by the formula TC = a + bX, “b” is:
Solutions
Expert Solution
Solution:
If costs are represented by the formula TC = a+bX, then "b" is:
Answer: Variable Cost per unit of activity
Explanation: The cost formula TC = a+bX is basically the algebric formula of mixed costs which consist of total fixed cost and total variable cost calculated on the basis of level of activity. In the cost formula TC = a+bX,
TC = Mixed cost, the sum of Total Fixed Cost and Total Variable Cost.
a = Total Fixed Cost per period which remains constant on any level of acitivity.
b= Variable Cost per unit of activity.
X= Level of Activity (Number of Units of Activity)
"b" i.e. Variable Cost per unit of activity will always remain constant and it is multiplied by the "X" i.e. Level of Activity (Number of Units of Activity) to arrive at the Total Variable Cost. Total Variable Cost changes with the change in level of activity.
Thus, with the help of above explanation, in the cost formula TC = a+bX, we conclude that "b" represents Variable Cost per unit of activity.
ekkarill92 answered 1 year agoRelated Solutions
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Consider a firm with total costs represented by
TC=16+Q^2 and a corresponding marginal cost of 2Q
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1). Graph the ATC and MC, be certain to label the lowest point
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Consider that firm faces a price of 12$.
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Consider a firm with total costs represented by TC=16+Q^2 and a corresponding marginal cost of 2Q...
Consider a firm with total costs represented by TC=16+Q^2 and a
corresponding marginal cost of 2Q (MC=2Q)
1. Graph the ATC and MC, be certain to label the lowest point of
the ATC.
Consider that firm faces a price of 12$.
2. Find the optimal quantity.
3. Graph and find the total cost, total revenue, and any profit
or loss at the optimal quantity.
Consider a firm with total costs represented by TC=16+Q^2 and a corresponding marginal cost of 2Q...
Consider a firm with total costs represented by TC=16+Q^2 and a
corresponding marginal cost of 2Q (MC=2Q)
1. Graph the ATC and MC, be certain to label the lowest point of
the ATC.
Consider that the firm faces a price of $12.
2. Find the optimal quantity
3. Graph and find the total cost, total revenue and any profit
or loss at the optimal quantity
Consider a firm with total costs represented by TC=8+1/2Q2 and a corresponding marginal cost of Q(MC=Q)...
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and a corresponding marginal cost of Q(MC=Q)
1) Graph the ATC and MC, be certain to label the lowest
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Consider that the firm faces a price of $10
2) Find the optimal quantity
3) Using the ATC/MC graph, find and diagram, the total cost,
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