Situation 21-3
Gizmos, Inc. produces gizmos at an average total cost of $22 and an average variable cost of $14. The only fixed input used in the production of gizmos costs $32,000.
Refer to Situation 21-3. How many gizmos does Gizmos, Inc. produce?

Question

Quizplus · Accepted Answer

The average total cost (ATC) is calculated as the total cost divided by the quantity produced. Given ATC is $22 and the fixed cost is $32,000, we can set up the equation: $22 = ($32,000 + $14Q) / Q. Solving for Q gives 4,000 gizmos.

Situation 21-3 Gizmos, Inc. Produces Gizmos at an Average Total Cost of Cost