If fixed cost is $200,000 and variable cost is $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be:
A) $20.
B) $30.
C) $50.
D) $70.

Question

Quizplus · Accepted Answer

The formula for average total cost is: 
ATC = (Total Fixed Cost + Total Variable Cost) / quantity produced

Given: 
Fixed cost = $200,000 
Variable cost = $30 per unit 
Quantity produced = 10,000

Total variable cost = Variable cost per unit x Quantity produced 
Total variable cost = $30/unit x 10,000 units 
Total variable cost = $300,000

ATC = (Total Fixed Cost + Total Variable Cost) / quantity produced 
ATC = ($200,000 + $300,000) / 10,000 units 
ATC = $500,000 / 10,000 units 
ATC = $50

Therefore, the average total cost will be $50 when 10,000 units are produced.

If Fixed Cost Is $200,000 and Variable Cost Is $30