calculate AC,AVC and the amount of profit that the firm will earn , if it sells the entire output at rs60 per unit
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Wages, purchases and power and fuel are variable costs as they vary directly with level of output.
Interest and rent are fixed cost as they are bound to be paid whether the output is increasing, decreasing or even zero.
TVC = Wages+Raw materials+Fuel
= 20000+60000+10000
= Rs 90000
AVC = TVC ÷ Q
= 90000 ÷ 2000 = Rs 45
TFC = Interest + Rent
= 6000+4000
= Rs 10000
TC = TFC + TVC
= 90000 + 10000
= Rs 100000
Selling price (SP) = 60 × 2000
= Rs 120000
Profit = 120000 - 100000
= Rs 20000
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