Plowin' Supply plans to make 15,000 tractors at its plant. Fixed costs are $540,000 and variable costs are $200 per tractor. What is the average cost per tractor?

Question

Quizplus · Accepted Answer

Total cost = Fixed cost + (Variable Cost per unit × Number of units)

Total cost = $540,000 + ($200 × 15,000)

Total cost = $540,000 + $3,000,000

Total cost = $3,540,000

Average cost per tractor = Total cost ÷ Number of tractors

Average cost per tractor = $3,540,000 ÷ 15,000

Average cost per tractor = $236

Plowin' Supply Plans to Make 15,000 Tractors at Its Plant