Jason's carpentry business has a fixed cost of $5,000 from equipment and tool rental and a variable cost of $40,000 when he builds 100 bookshelves per year. The average total cost of producing 100 bookshelves is:

Question

Quizplus · Accepted Answer

The average total cost (ATC) is calculated by dividing the total cost by the quantity produced. The total cost includes both fixed and variable costs. Here, the total cost is $5,000 (fixed) + $40,000 (variable) = $45,000 for 100 bookshelves. Therefore, the ATC = $45,000 / 100 = $450.

Jason's Carpentry Business Has a Fixed Cost of $5,000 from Equipment