Output (units) Total Fixed Costs Total Variable Total Costs ($) Average Costs ($)

($) Costs ($)

0 20 000 - - -
100 20 000 5 000 25 000 250
200 20 000 10 000 30 000 150
300 20 000 14 500 34 500 115
400 20 000 18 000 38 000 95
500 20 000 25 000 45 000 90.0
600 20 000 38 200 58 200 97.0

a) Total fixed cost does not change→ 20 000 $ is the fixed cost no matter what the output is
Total cost is total fixed cost + total variable cost, hence we can have the total cost first in the
table for the 100 and 200 units.
(20 000 + 5000 = 25000)
(20 000 + 10 000 = 30 000)
While to know the total variable cost for units 300 and 400 we will do the following:
Total costs – total fixed cost = total variable costs
(34 500 – 20000 = 14 500)
(38 000 – 20000 = 18000)
To calculate the total cost and total variable cost for 500 and 600 units:
Average cost = total cost/quantity
So we can get the total cost from this equation
90.0 = total cost/500
→ total cost = 90*500 = 45 000 for the 500 units
➔ Total cost = 97*600 = 58 200 for the 600 units
➔ Total variable cost = 45 000 – 20 000 = 25 000 for the 500 units
➔ Total variable cost = 58 200 – 20 000 = 38 200 for the 600 units

Last thing is to find total cost for the rest of the units:

Average cost= total cost / quantity

➔ For the 100 units: 25000/100 = 250 average cost

➔ For the 200 units: 30000/200 = 150 average cost
➔ For the 300 units: 34500/300 = 115 average cost
➔ For the 400 units: 38000/400 = 95 average cost
b)

c) Total fixed cost has a straight line because the fixed costs stay the same no matter how
much the production increases
The total variable cost, as output increases, so too do the total variable costs
Total Cost line starts at the same value as fixed costs because these have to be paid even if
there is no output. The numerical difference between the Total Cost (TC) and total variable
cost (TVC) lines at each level of output is equal to the value of total fixed costs.