Question

Mighty Muffler, Inc. operates an automobile service facility that specializes in replacing mufflers on compact cars. The following table shows the costs incurred during a month when 800 mufflers were replaced. (Round "cost per muffler" to 2 decimal places.)

Number of Muffler Replacements 800 700 900 Total costs: Fixed costs $ 72,800 72,800 72,800 Variable costs 40,800 Total costs $ 113,600 Cost per muffler replacement: Fixed cost Variable cost Total cost per muffler replacement

Answer 1

Total fixed cost and variable cost/unit do not change with change in units

VC/muffler=(40800/800)=$51

	700	800	900
Total costs:
Fixed costs	72800	72800	72800
Variable cost	35700	40800	45900
Total costs	$108500	$113600	$118700
Cost per muffler replacement:
Fixed cost(Total fixed cost/total number of muffler replacements)	104	91	80.89(Approx)
Variable cost	51	51	51
Total cost	155	142	131.89(Approx)