Scenario 9.1: 21st Century Pen Inc.produces 2000 pens per day,and hires 20 workers at a cost of $200 per day per worker.The price of each pen is $5 each.21st Century Pen Inc.pays a daily rental rate of $60 on its factory and a daily insurance rate of $20.21st Century Pen Inc.has a ten year lease on the factory and insurance contract for a year,the company has no other expenses.
-Refer to Scenario 9.1.21st Century Pen Inc.'s average total cost at an output of 2000 pens per day is approximately:

Question

Quizplus · Accepted Answer

To calculate the average total cost, we need to add up all the costs (fixed and variable) and divide by the total output. 
Total variable cost = 20 workers x $200 per day = $4000
Total fixed cost = $60 (rental rate) + $20 (insurance rate) = $80
Total cost = $4000 + $80 = $4080
Average total cost = Total cost / output = $4080 / 2000 = $2.04 per unit. Therefore, the answer is C.