Use the following to answer question:
-(Table: Cakes)Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 1 mixer and bakes 100 cakes per day,what is her average total cost?
A)$1,010
B)$20
C)$15
D)$10

Question

Use the following to answer question: 
-(Table: Cakes)Use Table: Cakes.Pat is opening a bakery to make and sell special birthday cakes.She is trying to decide how many mixers to purchase.Her estimated fixed and average variable costs if she purchases 1,2,or 3 mixers are shown in the table.Assume that average variable costs do not vary with the quantity of output.If Pat purchases 1 mixer and bakes 100 cakes per day,what is her average total cost?
A)$1,010 
B)$20 
C)$15 
D)$10

Quizplus · Accepted Answer

The average total cost (ATC) is calculated by adding the average fixed cost (AFC) and the average variable cost (AVC) and then dividing by the quantity of output. If the table provided shows that with 1 mixer, the fixed cost is $1,000 and the average variable cost is $10 per cake, then for 100 cakes: ATC = (Fixed Costs + (Variable Cost per Cake * Quantity)) / Quantity = ($1,000 + ($10 * 100)) / 100 = ($1,000 + $1,000) / 100 = $2,000 / 100 = $20.

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