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Fixed Costs and Variable Costs: Unit 7 Assignment

Given the overall costs and the quantity generated, you will define and calculate the remaining six key cost components of a business in this assignment.

You will also utilize the computed costs to establish a minimum cost output level for that business.

You will also clearly describe how a new output level’s average total cost is impacted by its share of fixed and variable costs.

 

Questions

 

  1. Explain how to calculate each of the following when ONLY Total Costs (TC) are known:

 

Costs Fixed (FC) (1 point)

 

(c) Variable Costs (1 point)

 

AVC, or Average Variable Costs (1 point)

 

ATC, or Average Total Costs (1 point)

 

AFC, or Average Fixed Costs (1 point)

 

MCs (Marginal Costs) (1 point)

 

  1. Estimated hourly production and total costs for a new manufacturing company looking to enter the smartphone industry are shown in Table 1. By calculating the necessary values, fill in the empty cells in columns a, b, c, d, and e of the table.
Table 1

Smart cell phones produced in an hourTotal Cost (TC)Variable Costs (VC)

(2 points)

a.

Average Variable Costs (AVC)

(2 points)

b.

Average Total Costs (ATC)

(2 points)

c.

Average Fixed Cost (AFC)

(2 points)

d.

Marginal Cost (MC)

(3 points)

e.

0$3,200 n/an/an/an/a
15$3,525     
30$3,875     
45$4,250     
60$4,650     
75$5,075     
90$5,525     
105$6,725     
120$8,210     
135$9,950     

 

  1. What is the minimum cost output level for this manufacturer based on your calculations in filling out the table in Question 2? Describe your response. Three points

 

  1. The Spreading effect and the Diminishing Returns effect have a direct impact on the change in average total costs when one more unit is produced, the textbook states on page 334. Explain how the Spreading impact and the Diminishing Returns effect affect the average total cost in the following two scenarios.

 

The average total cost (ATC) for the manufacturing of the tenth gadget was $20, while the ATC for the eleventh gadget was $22. Three points

 

The average total cost (ATC) for the manufacturing of the 10th gadget was $20, whereas the ATC for the production of the 11th gadget was $18. Three points

Last Updated on September 22, 2022

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