A firm has fixed costs (FC) of $10,000. Its variable costs (VC) to produce 5,000 widgets are $2,000 and to produce 10,000 widgets are $3,000. What is the firm's total cost (TC) to produce 5,000 widgets?

Question

Business

Ruth Robbins

4 October, 00:53

A firm has fixed costs (FC) of $10,000. Its variable costs (VC) to produce 5,000 widgets are $2,000 and to produce 10,000 widgets are $3,000. What is the firm's total cost (TC) to produce 5,000 widgets?

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Answers (1)

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Lyla Doyle · Answer 1

The firm's total cost (TC) to produce 5,000 widgets is $12,000.

Explanation:

Total Cost : It is the sum of Fixed cost and Variable cost

where,

Variable cost is the cost which is change when production level changes. while, fixed cost is the cost which is fixed whether production level change or not.

The following information is given in the question:

1. Fixed cost = $10,000

2. Variable cost for 5,000 widgets = $2,000

3. Variable cost for 10,000 widgets = $3,000

The formula for calculating Total Cost to produce 5,000 widgets is shown below:

Total cost = Fixed cost + Variable cost

= $10,000 + $2,0000

= $12,000

Since, the question is asking for only $5,000 widgets and in the given question, the variable cost is given for $5,000 widgets is $2,000. So, this variable cost is used and for the fixed cost the amount will be same.

Thus, The firm's total cost (TC) to produce 5,000 widgets is $12,000.