Q.

If the average total cost is Rs.54, total fixed cost is Rs.45000 and quantity produced is 2500 units, find the average variable costs (in Rs.) of the firm -

A. 24
B. 18
C. 36
D. 60
Answer» C. 36
Explanation: The standard method of calculating average variable cost is to divide total variable cost by the quantity, illustrated by this equation :
Average Variable Cost = Total Variable Cost/ Quantity of Output
An alternative specification for average variable cost is found by subtracting average fixed cost from average total cost
Average Variable Cost = Average Total Cost - Average Fixed CostAccording to question,
Average Total Cost = 45000/2500 = 18 So Average Variable Cost = 54 - 18= 36
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