Question

Tina employs 4 people in her pizza​ store, where she produces 12 pizzas an hour. Her total fixed​ cost, total variable​ cost, and total costs of pizza production per hour are​ $15, $19.40, and​ $34.40 respectively. Calculate​ Tina's average fixed cost​, average variable cost and average total cost.

A. ​$34.40; $15;​ $19.40

B. ​$1.25; $1.62;​ $2.87

C. ​$1.25; $2.87;​ $1.62

D. ​$1.62; $10;​ $1.25

Answer 1

B. ​$1.25; $1.62;​ $2.87

Step-by-step explanation:

Total fixed cost is cost that doesn't change with the level of output produced. E.g. rent

Average fixed cost = Total fixed cost / output produced = $15 / 12 = $1.25

Total variable cost is cost that changes with the level of output produced. E.g. wages

Average variable cost = Total variable cost / output produced = $19.40 / 12 = $1.62

Total cost is the sum of total fixed cost and total variable cost.

Average cost = Total cost / output produced =$34.40 / 12 = $2.87

I hope my answer helps you.