Daniella owns a small concrete-mixing company. Her fixed cost is the cost of the concrete-batching machinery and her mixer trucks. Her variable cost is the cost of the sand, gravel, and other inputs for producing concrete; the gas and maintenance for the machinery and trucks; and her workers. She is trying to decide how many mixer trucks to purchase. She has estimated the costs shown in the accompanying table based on estimates of the number of orders her company will receive per week.

a. For each level of fixed cost, calculate Daniella’s total cost for producing 20, 40, and 60 orders per week.

b. If Daniella is producing 20 orders per week, how many trucks should she purchase and what will her average total cost be? Answer the same questions for 40 and 60 orders per week.

Transcribed Image Text:

VC Quantity of trucks FC 20 orders 40 orders 60 orders 2 $6,000 $2,000 $5,000 $12,000 3 7,000 1,800 3,800 10,800 4 8,000 1,200 3,600 8,400