A firm produces 500 units per week.It hires 20 full-time workers (40 hours/week)at an hourly wage of $15.Raw materials are ordered weekly and they costs $10 for every unit produced. The weekly cost of the rent payment for the factory is $2,250.How do the overall costs breakdown?

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Quizplus · Accepted Answer

Variable costs include wages and raw materials. Wages are 20 workers * 40 hours/week * $15/hour = $12,000. Raw materials are $10/unit * 500 units = $5,000. So, total variable cost = $12,000 + $5,000 = $17,000. Fixed cost is the rent payment of $2,250. Total cost = variable cost + fixed cost = $17,000 + $2,250 = $19,250.

A Firm Produces 500 Units Per Week