Question

At a quantity of 80 , the average total Cost is $130, the average Variable cost is $90, and Total Variable cost is $7,200. What is the total Fix cost?

A. $40
B. $10,400
C. $3200
D. $210
​

Answer 1

The fixed cost can be calculated by subtracting the total variable cost from the total cost. In this case, the fixed cost is $3,200.

Step-by-step explanation:

The fixed cost can be calculated by subtracting the total variable cost from the total cost. In this case, the total variable cost is given as $7,200 and the average variable cost is $90. We can use the formula: Total Variable Cost = Average Variable Cost × Quantity of Output.

So, $7,200 = $90 × Quantity of Output. Rearranging the formula, we find: Quantity of Output = $7,200 / $90 = 80. This means that the quantity of output is 80.

Now, we can use the formula for average total cost: Average Total Cost = Total Cost / Quantity of Output. The average total cost is given as $130, so we can rearrange the formula to find: Total Cost = Average Total Cost × Quantity of Output = $130 × 80 = $10,400.

Since the fixed cost is the difference between the total cost and the total variable cost, we can calculate: Fixed Cost = Total Cost - Total Variable Cost = $10,400 - $7,200 = $3,200.