Question

The average total cost of producing electronic calculators in a factory is $12 at the current output level of 150 units per week. If fixed cost is $560 per week, then what is the firm's variable cost? (enter answer as just a number, no commas, dollar signs, or the like)

Answer 1

Total Cost = Fixed Cost + Variable cost

Average total cost = Total Cost / output

Average fixed cost = Fixed Cost / output

Average variable cost = Variable Cost / output

Average total cost = Average fixed cost + Average variable cost

Now coming to question

Average total cost = 12

Fixed Cost = 560

Output = 150

Variable Cost = ??

Average total cost = Total Cost / output

12 = Total Cost / 150

Total Cost = 1800

Total Cost = Fixed Cost + Variable cost

1800 = 560 + Variable Cost

Variable Cost = 1240