Question

Number of Units Produced ('000)	0	10	20	30	40
Total Cost                            ($'000)	600	2,000	3,200	4,200	6,600

Assume the production facility produces where average variable costs are minimized. If the price is $12.50 per case, what is your gain or loss?

(If a loss, enter it as a negative number. Don't enter this as 'thousands of dollars' -- take into account that costs and output units are in thousands.)

Answer 1

Ans: There is loss of -$3825 (thousands.)

Explanation:

Total cost = Total fixed cost + Total variable cost

Fixed is available even at zero level of output and that will remain constant in the subsequent level of production.

Average Variable cost = Total Variable cost / Number of units produced

Total Revenue = Price per unit * Number of units produced

Profit / Loss = Total Revenue - Total Cost

Average variable cost is minimum at 30 thousand units of output.

Number of Units Produced ( '000)	Total Cost ($'000)	Total Fixed Cost ($'000)	Total Variable Cost ($'000)	Average Variable Cost ($'000)	Total Revenue ($'000)	Profit / Loss ($'000)
0	600	600	0	--	0	-600
10	2000	600	1400	140	125	-1875
20	3200	600	2600	130	250	-2950
30	4200	600	3600	120	375	-3825
40	6600	600	6000	150	500	-6100