Question

Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000.
The firm's fixed cost was

A. $2,000.
B. $28,000.
C. $12,000.
D. $42,000.

Answer 1

The firm's fixed cost was

A. $2,000.

Explanation:

• the total fixed costs divided by the total number of units produced.

• a total cost of dairy incurred is $40,000.

• variable costs of dairy incurred is $28,000
• It produced 7,000 pounds and sold it each pound for $6.
• Few examples of fixed costs are
• Interest expense.
• Salaries
• Property taxes.
• Insurance
• Rent.

• Utilities.
• The total cost is the Cost of production which does not change with the changes in the quantity of products produced by a firm in a short period of time.

• The firm's fixed cost was $2,000.