Consider table 31 What is the dollar amount of average varia

Consider table 3.1. What is the dollar amount of average variable cost per unit at the production level of 200 units? (units) $100 100 $410 $650 $100 $150 $1,350 $1,750 $400 $1,200 $1,520 $1,905 $2,300 $2,670 $3,205 $3,750 $300 S700 Select one: O a. 3.75 O b. 7.50 c. 8.50 Od. 9.50

Solution

Rent and Tools are not variables costs. Tools are investment in fixed assets and Rent is something that remains the same for a long period of time. Considering this, only wages and supplies are to be considered as a part of variable cost. At 200 units they sum to (650+100=) $750. Thus the per unit average variable cost is 750/200 = 3.75. Thus the first choice is the correct answer.

Thank You and Best of Luck :)