A firm produces 5000 waterproof cellphone cases,which they sell for $30 each.They have $35,000 in fixed costs and $85,000 in total costs every year.What is the average total cost?

Question

Quizplus · Accepted Answer

Average total cost = Total cost / Quantity

Total cost = Fixed cost + Variable cost
Variable cost = Total cost - Fixed cost

Variable cost per unit = (Total cost - Fixed cost) / Quantity
Variable cost per unit = ($85,000 - $35,000) / 5000
Variable cost per unit = $10

Average total cost = ($85,000 / 5000) + $10
Average total cost = $17

Therefore, the best choice is C because it is the lowest average total cost option.

A Firm Produces 5000 Waterproof Cellphone Cases,which They Sell for $30