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The table below sets out cost information for the production of volleyball
The table below sets out cost information for the production of volleyball. Some values are missing. Which of the following statements is correct?
| Quantity | Variable Cost | Fixed Cost | Total Cost | Avenge Variable Cost ($ per unit) | Marginal Cost ($ per unit) |
| 0 | 0 | 30 | 30 | 0 | |
| 1 | 12 | B | 12 | E | |
| 2 | 25 | C | D | F | |
| 3 | A | 72 | 14 | G |
A. A = 42; E = 40.
B. A = 70; E = 40.
C. A = 25; E = 12.
D. A = 70; E = 12.
Expert Solution
The calculated values of A and E are $42 and $12 respectively.
Since the fixed cost does not change with the production volume, the marginal cost for producing 1st unit is the variable cost incurred for producing 1st unit. Hence the value of E (i.e. marginal cost of 1st unit) is $12.
The variable cost for producing 3 units (i.e. A) is given by:
=Average variable cost for 3 units * Number of units=$14∗3=$42
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