In a slow year, Deutsche Burgers will produce 1 million hamburgers at a total co
ID: 2366341 • Letter: I
Question
In a slow year, Deutsche Burgers will produce 1 million hamburgers at a total cost of $2.9 million. In a good year, it can produce 2 million hamburgers at a total cost of $3.3 million. a. What is the average cost per burger when the firm produces 0.5 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Average cost $______ per burger b. What is average cost when the firm produces 1 million hamburgers? (Round your answer to 2 decimal places.) Average cost $_______ per burger c. Why is average cost lower when more burgers are produced? please choose the correct choice from below Fixed costs are constant per burger. or Variable costs are lower per burger. or The fixed costs are spread across less burgers. or The fixed costs are spread across more burgersExplanation / Answer
variable cost of burger = (3.3-2.9)/(2-1) = $0.4/unit and fixed cost = 3.3 - 2*0.4 = $2.5 million a) total cost = 2.5 + 0.5*0.4 = $2.7 million Average cost per burger = 2.7/.5 = $5.4 b) total cost = 2.9 million Average cost per burger = 2.9/1 = $2.9 c) Fixed cost are spread across more burgers