Question

Concept Question 3.12 w are a magazine publisher. You are midway through a one-year rental contract for your factory that requires you to pay $550,000 per month, and you have contractual bor obligations of $1,000,000 per month that you can't get out of You also have a marginal printing cost of $$1.75 per magazine as well as a marginal delivery cost of $1.25 per magazine Suppose sales fall by 25 percent from 1,500,000 magazines per month to 1,125,000 magazines per month The average foxed cost per magazine from super magazine to per magazine. (Enter your responses rounded to two decimal places) Check Enter your answer in the edit fields and then click Check Answer Clear All art

Answer 1

There are two kinds costs in the production and they are fixed costs and the variable costs, the fixed costs are those costs which do not vary with the output produced such as capital ,machineries , buildings , interest payments etc... The variable costs which varies with the output produced such as rent, wages , salaries , input costs etc....

In the given question the fixed costs are ,

The rental contract for the company : .

Contractual labour obligations:.

The variable costs are the printing costa and the delivery costs.

The average fixed cost is find out by dividing the total fixed cost by the quantity produced.

Total fixed cost :

$=1,000,000+550,000$.

$=15,50,000$.

.

AFC = TFC/Q

   $=15,50,000/1500000$ .

$=1.033$.

For the second quantity ,

  $=15,50,000/1,125,000$.

$=1.37$.

Ans: The average fixed cost increased from to .