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Chloe's Cafe bakes croissants that it sells to local restaurants and grocery stores
Chloe's Cafe bakes croissants that it sells to local restaurants and grocery stores. The average costs to bake the croissants are $0.35 for 3,200 and $0.30 for 6,400.
Required: If the total cost function for croissants is linear, what will be the average cost to bake 5,600? (Do not round intermediate calculations. Round your final answer to 4 decimal places.)
Average
Expert Solution
Computation of Average Cost to bake 5600 units:
Unit Variable Cost = (6400*0.30 - 3200*0.35)/(6400-3200)
= 800/3200
= $0.25 per unit
Fixed Cost = 6400 * (0.30-0.25) or 3200*(0.35-0.25) = $320
At 5,600,
Total Cost = Fixed Cost + Variable Cost
= $320 + (5,600*$0.25)
= $320 + $1,400
Total Cost = $1,720
Average Cost to bake 5600 units = $1,720/5,600 = $0.3071
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