Question:
Find average variable cost of 3,000,000 pairs of shoes
Is the answer $16.00? I got that answer by multipling the ATC ($20.00) by the percent of variable cost (80%)
Athletic Shoe Production
Normal Profit $6.00
Leather costs $2.00
Rubber costs $3.50
Metal costs $ .50
Cotton costs $3.00
Assembly $5.00
Total: $20.00
This is the lowest possible cost for the production of a single pair of shoes.
It is also the Average total cost (ATC) of the profit maximizing or loss minimizing quantity of shoes: 3,000,000
Plant & Equipment 20% if total assembly cost (not ATC)
Labor 80% of total assembly cost (not ATC)