Question

Meat​ Packers, Incorporated​ (MPI) preserves and packages various kinds of meats for transportation to grocery stores. To prepare and transport each meat package to a grocery​ store, the firm must purchase ​$20 in raw meat and pay ​$90 in wages for labor and ​$40 in fuel costs. In​ addition, the firm rents a factory for ​$10,000 per month and makes ​$3,000 in monthly payments on meat packaging equipment. Suppose the firm prepares and transports 3,000 packages of meat per month. What are the​ firm's fixed and variable costs of production in a given​ month?

Answer 1

Fixed costs = $13,000

Variable costs = $450,000

Step-by-step explanation:

Fixed costs are costs that do not vary with production. In this question, they are rent payments and monthly payments on meat packaging equipment.

Fixed cost = $10,000 + $3,000 = $13,000

Variable costs are costs that vary with production. In this question, they are the cost of purchase of raw meat, wages and fuel costs.

Variable costs = ($20 + $90 + $40) × 3000 = $450,000

I hope my answer helps you.