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Production Costs for General Motors
Variable + Fixed costs = $1,000,000 + $10,000,000 = $11,000,000 in total production costs. Average over 100 SUV's, the average cost is $11,000,000 / 100 = $110,000.
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Types of Costs
Here, three important types of costs- Total Variable Costs (TVC), Average Variable Costs (AVC) and Marginal Costs (MC) are discussed.
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Calculating Total, average and marginal costs
output)
Solution describes the steps and formulas for calculating total fixed cost, total variable cost, total cost, average variable cost, average fixed cost average total costs and marginal costs.
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Company "A" and "B" sell an identical product: one uses labor saving equipment
Profit = (price - average Variable Costs)*units sold - Fixed costs
or,
Profit + Fixed costs = (price - average Variable Costs)*units sold
units sold = (Profit + Fixed costs)/(price - average Variable Costs)
For company A,
units sold = (Profit +
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Short-run marginal cost curves
As such, average variable costs are unchanged. Average total costs would increase by $100 divided by the quantity of production.
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Solving a Firm's Costs
(d) Decrease in rent payment will not affect marginal and average cost curves but the average cost cure will be pushed down.
This solution helps with problems involving a firm's costs. including variable costs, wages and material costs.
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Average costs and Variable costs as a Performance measure
Three problems are discussed for average costs and three for using variable costs.
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Multiple Choice relating to Cost Volume Profit
(Semi) Variable Cost; Contribution Margin Ratio; Average Cost Per Unit 16. Item A sells for $5. Fixed costs per unit are $1, and variable costs per unit are $3. The contribution margin ratio for item A is 20%.
a. True
b. False
17.
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Total/Average Costs
389097 Total/Average Costs Fixed Costs: $250,000
Average Variable Costs: $10 + .01Q
Projected annual volume: 4,000 units
I. Estimate total cost and average total cost
II.
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Breakeven Output and Total Sales Revenue
Total Fixed Costs:
Copy Editing 10,000
Typesetting 70,000
Selling and Promotion 20,000
Total fixed costs: 100.000
Average Variable Costs
Printing and Binding 6
Administrative Cost 2
Sales Commissions 1
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