Best Birdies produces ornate birdcages. The company's average cost per unit is $23 when it produces 2600 birdcages. If $5900 of the total costs are fixed, what is the variable cost of producing each birdcage?

Question

Quizplus · Accepted Answer

We can use the formula for average cost per unit:

average cost = (total cost)/(number of units)

Plug in the given values:

$23 = (total cost)/2600

Solve for the total cost:

total cost = $23 x 2600 = $59,800

Subtract the fixed costs:

variable costs = total cost - fixed costs = $59,800 - $5,900 = $53,900

Finally, divide the variable costs by the number of units to find the variable cost per birdcage:

variable cost per birdcage = $53,900/2600 = $20.73

Therefore, the correct answer is D.

Best Birdies Produces Ornate Birdcages