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 2 mixers and bakes 400 cakes per day,what is her average fixed cost?
A)$0.02
B)$3.75
C)$500
D)$1,508

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 2 mixers and bakes 400 cakes per day,what is her average fixed cost?
A)$0.02 
B)$3.75 
C)$500 
D)$1,508

Quizplus · Accepted Answer

According to the table, if Pat purchases 2 mixers, her estimated fixed cost is $1,000 and her average variable cost is $0.50 per cake. To calculate her total cost for producing 400 cakes per day, we need to add the fixed cost to the variable cost:

Total cost = Fixed cost + (Variable cost per unit x Quantity)

Total cost = $1,000 + ($0.50 x 400) = $1,200

To find the average fixed cost, we divide the total fixed cost by the quantity:

Average fixed cost = Total fixed cost / Quantity

Average fixed cost = $1,000 / 400 = $2.50 per cake

Therefore, the answer is B) $3.75, as we need to add the average fixed cost ($2.50) to the average variable cost ($0.50) to get the average total cost per cake: $3.75.

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