Situation 21-1 Diane's Donuts will begin selling donuts next week. Diane figures that the average variable cost to make each donut will be constant at $0.30. She has already paid $20,000 for the donut-making machinery and one year's rent.
Refer to Situation 21-l. What will Diane's total costs be if she sells 2,500 donuts in her first week and then goes out of business?

Question

Quizplus · Accepted Answer

Diane's total costs will include the fixed costs (machinery and rent) of $20,000 and the variable costs of producing 2,500 donuts at $0.30 each, which is $750. Therefore, the total cost is $20,000 + $750 = $20,750.

Situation 21-1 Diane's Donuts Will Begin Selling Donuts Next Week