Bob’s Burgers currently produces and sells 4000 burgers per month with the following costs:
$\begin{array}{ll}
\text { Variable costs } & \$ .50 \text { per unit } \
\text { Fixed costs } & \$ 2000
\end{array}$
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $.05 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $40 per month.
-What will be Bob's new cost equation?

Question

Bob’s Burgers currently produces and sells 4000 burgers per month with the following costs:
$\begin{array}{ll}
\text { Variable costs } & \$ .50 \text { per unit } \
\text { Fixed costs } & \$ 2000
\end{array}$ 
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $.05 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $40 per month.
-What will be Bob's new cost equation?

Quizplus · Accepted Answer

The new cost equation accounts for both the decrease in variable costs by $.05 (from $.50 to $.45 per unit) and the decrease in fixed costs by $40 (from $2000 to $1960).

Bob’s Burgers Currently Produces and Sells 4000 Burgers Per Month Variable costs $.50 per unit Fixed costs $2000\begin{array}{ll}\text { Variable costs } & \$ .50 \text { per unit } \\\text { Fixed costs } & \$ 2000\end{array} Variable costs Fixed costs ​$.50 per unit $2000​

Bob’s Burgers Currently Produces and Sells 4000 Burgers Per Month $\begin{array}{ll}\text { Variable costs } & \$ .50 \text { per unit } \\\text { Fixed costs } & \$ 2000\end{array}$