Question

Gut Bombs sandwich shop pays $5,000 a month in rent space and equipment. It pays each of it 10 workers $2,500 a month and spends $5,000 on food. There are no other production costs. Usually the shop sells 3,500 sandwiches per month for $10 each.Their average fixed cost per month per sandwich, rounded to the nearest penny, is

Answer 1

The average fixed cost per month per sandwich at Gut Bombs sandwich shop is $8.57 when the shop's total fixed costs of $30,000 are divided by the average monthly sales of 3,500 sandwiches.

Step-by-step explanation:

To calculate the average fixed cost per month per sandwich, we must first determine the total fixed costs and then divide this by the number of sandwiches sold per month. Gut Bombs pays $5,000 a month in rent and equipment, which is a fixed cost. With 10 workers earning $2,500 each per month, the total fixed cost for labor is $25,000. Therefore, the total fixed costs are $30,000 ($5,000 for rent and equipment + $25,000 for labor). If they usually sell 3,500 sandwiches per month, we divide the total fixed costs by the number of sandwiches to get the average fixed cost per sandwich.

Average Fixed Cost per Sandwich = Total Fixed Costs / Number of Sandwiches Sold per Month
= $30,000 / 3,500 sandwiches
= $8.57 per sandwich (rounded to the nearest penny)

Answer 2

Average fixed cost= $1.43

Step-by-step explanation:

Giving the following information:

Production costs:

Rent= $5,000

Direct labor= $2,500

Direct material= $5,000

Usually, the direct labor cost is variable. In some conditions, it is a fixed cost. We will consider it as a variable cost.

Total fixed cost= 5,000

Average fixed cost= 5,000/3,500

Average fixed cost= $1.43