Question

​Plowin' Supply plans to make 15000 tractors at its plant. Fixed costs are $ 540000 and variable costs are $ 200 per tractor. What is the average cost per​ tractor?

Answer 1

Answer:

The average cost per​ tractor is $236

Explanation:

The average cost is calculated by dividing the sum of variable costs and fixed costs by the quantity of units produced.

Average cost per unit = Total cost of production/Quantity of units produced

Plowin' Supply plans to make 15,000 tractors with fixed costs are $ 540,000 and variable costs are $200 per tractor.

Total variable costs = 15,000 x $200 = $3,000,000

Total cost = Total variable costs + Fixed costs = $3,000,000 + $540,000 = $3,540,000

Average cost per​ tractor = $3,540,000/15,000 = $236

Answer 2

Based on the fixed costs and variable costs of making the tractors, the average cost per tractor is $236.

The average cost per tractor can be found by the formula:

= (Fixed costs + Variable costs) / Number of tractors made

Solving gives:

= (540,000 + (200 x 15,000)) / 15,000

= (540,000 + 3,000,000) / 15,000

= $236

In conclusion, average cost is $236.

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