Essay About Average Cost And Total Fixed Cost Equals

Average Cost and Veriable Cost
About the firm:
Number of workers: 50,000
Daily wage per worker: $80
Production: 200,000 units of output per day
Price of the firm’s output is $25 each unit
Cost of other variable inputs is $400,000 per day.
Scenario #1
Assume that total fixed cost equals $1,000,000. Calculate the values for the following four formulas:
•Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs = _____
•Average Variable Cost = Total Variable Cost / Units of Output per Day = _____
•Average Total Cost = (Total Variable Cost +Total Fixed Cost) / Units of Output per Day = _____
•Worker Productivity = Units of Output per Day / Number of Workers = _____
•Profit or Loss = _____
Scenario #2
Assume that total fixed cost equals $3,000,000, and recalculate the values:
•Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs = _____
•Average Variable Cost = Total Variable Cost / Units of Output per Day = _____
•Average Total Cost = (Total Variable Cost +Total Fixed Cost) / Units of Output per Day = _____
•Worker Productivity = Units of Output per Day / Number of Workers = _____
•Profit or Loss = _____
Analysis:
Scenario #1: Compare the firm’s output price and the average variable cost and average total cost.
· Output Price =
· Average Variable Cost =
· Average Total Cost =