Scribd
Upload
66 views2 pages

Question 3.2.2 Calculating Business Costs Page 248

Total fixed costs remain constant at $20,000 regardless of output levels. Total costs are calculated as the sum of total fixed and total variable costs. Where data is missing, total variable costs are determined by subtracting total fixed costs from total costs. Average costs are calculated by dividing total costs by the corresponding output level. The total fixed cost line is flat as it does not change with output, while the total variable cost line increases as output and associated costs rise.

Uploaded by

lojain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
66 views2 pages

Question 3.2.2 Calculating Business Costs Page 248

Total fixed costs remain constant at $20,000 regardless of output levels. Total costs are calculated as the sum of total fixed and total variable costs. Where data is missing, total variable costs are determined by subtracting total fixed costs from total costs. Average costs are calculated by dividing total costs by the corresponding output level. The total fixed cost line is flat as it does not change with output, while the total variable cost line increases as output and associated costs rise.

Uploaded by

lojain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

Output (units) Total Fixed Costs Total Variable Total Costs ($) Average Costs ($)

($) Costs ($)


0 20 000 - - -
100 20 000 5 000 25 000 250
200 20 000 10 000 30 000 150
300 20 000 14 500 34 500 115
400 20 000 18 000 38 000 95
500 20 000 25 000 45 000 90.0
600 20 000 38 200 58 200 97.0

a) Total fixed cost does not change→ 20 000 $ is the fixed cost no matter what the output is
Total cost is total fixed cost + total variable cost, hence we can have the total cost first in the
table for the 100 and 200 units.
(20 000 + 5000 = 25000)
(20 000 + 10 000 = 30 000)
While to know the total variable cost for units 300 and 400 we will do the following:
Total costs – total fixed cost = total variable costs
(34 500 – 20000 = 14 500)
(38 000 – 20000 = 18000)
To calculate the total cost and total variable cost for 500 and 600 units:
Average cost = total cost/quantity
So we can get the total cost from this equation
90.0 = total cost/500
→ total cost = 90*500 = 45 000 for the 500 units
➔ Total cost = 97*600 = 58 200 for the 600 units
➔ Total variable cost = 45 000 – 20 000 = 25 000 for the 500 units
➔ Total variable cost = 58 200 – 20 000 = 38 200 for the 600 units

Last thing is to find total cost for the rest of the units:

Average cost= total cost / quantity

➔ For the 100 units: 25000/100 = 250 average cost


➔ For the 200 units: 30000/200 = 150 average cost
➔ For the 300 units: 34500/300 = 115 average cost
➔ For the 400 units: 38000/400 = 95 average cost
b)

c) Total fixed cost has a straight line because the fixed costs stay the same no matter how
much the production increases
The total variable cost, as output increases, so too do the total variable costs
Total Cost line starts at the same value as fixed costs because these have to be paid even if
there is no output. The numerical difference between the Total Cost (TC) and total variable
cost (TVC) lines at each level of output is equal to the value of total fixed costs.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy