define and calculate the remaining six major cost elements of a business, when given the total costs and the quantity produced, as well as use the computed costs to determine a minimum cost output level for that business. In addition, you will also clearly explain how the average total cost of a new output level is affected by its share of fixed costs and variable costs.

Questions

1. When ONLY Total Costs (TC) are known, explain how to calculate each of the following:

a.Fixed Costs (FC) (1 point)

A fixed cost is a cost that does not depend on the quantity of output produced. It is the cost of the fixed input

.

FC = TC - VC

b.Variable Costs (VC) (1 point)

Variable cost is a cost that depends on the quantity of output produced. It is the cost of the variable input.

VC = TC - FC

c.Average Variable Costs (AVC) (1 point)

Average variable cost is the variable cost per unit of output.

AVC = VC / Q

d.Average Total Costs (ATC) (1 point)

The Average total cost is the total cost divided by the quantity of output.

ATC = TC / Q

e.Average Fixed Costs (AFC) (1 point)

Average fixed cost is the fixed cost per unit of output.

AFC = FC / Q

f. Marginal Costs (MC) (1 point)

The marginal cost of producing a good or service is the additional cost incurred by producing one more unit of that good or service.

2. Table 1 shows the hourly production and Total Cost estimates for a new manufacturing firm wishing to enter the smartphone market. Fill in the blank cells in columns a., b., c., d., and e. on the table by computing the appropriate values.

Table 1