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A business incurs the following costs: •Labor: $100/unit• Materials: $40/unit• Rent: $200,000/month Assume the firm produces 3 million units per month
A business incurs the following costs:
•Labor: $100/unit•
Materials: $40/unit•
Rent: $200,000/month
Assume the firm produces 3 million units per month.
The total variable cost, per month, is million.
The total fixed cost, per month, is million.
The total cost is million.
Expert Solution
Computation of the total variable cost:-
Total variable cost = (Labor + Materials) * Number of units
= ($100 + $40) * 3
= $140 * 3
= $420 million
Computation of the total fixed cost:-
Total fixed cost = Rent
= $200,000 Or $0.20 million
Computation of the total cost:-
Total cost = Total variable cost + Total fixed cost
= $420 + $0.20
= $420.20 million
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