Problem 10-4 Fixed and Variable Costs (LO2) In a slow year, Deutsche Burgers will produce 3.2 million hamburgers at a total cost of $4.2 million. In a good year, it can produce 4.8 million hamburgers at a total cost of $5.4 million. a. What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) Fixed cost $ million b. What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Variable cost $ per burger c. What is the average cost per burger when the firm produces 2 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Average cost $ per burger d. What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Average cost $ per burger e. Why is the average cost lower when more burgers are produced? The fixed costs are spread across more burgers.

Problem 10-4 Fixed and Variable Costs (LO2)

In a slow year, Deutsche Burgers will produce 3.2 million hamburgers at a total cost of $4.2 million. In a good year, it can produce 4.8 million hamburgers at a total cost of $5.4 million.

a.	What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

Fixed cost

$ million

b.	What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Variable cost

$ per burger

c.	What is the average cost per burger when the firm produces 2 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

d.	What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Average cost

$ per burger

e.

Why is the average cost lower when more burgers are produced?

	The fixed costs are spread across more burgers.
	Fixed costs are constant per burger.
	Variable costs are lower per burger.

Fixed costs are constant per burger. Variable costs are lower per burger.