Question

The average cost of an item is defined as the total cost to produce divided by the number produced.A shoe company that pays $240,000 in rent and employee salaries per year figures it also must pay $3.50 in materials per shoe set it produces Write the equation needed to solve the problem. Use the equation to find the number of shoe sets the company would need to produce for the average cost of each set to be $7.50. Work out the problem, show all of your steps, and provide explanations.

Answer 1

Answer:

Step-by-step explanation:

Average cost = Total cost to produce / number of items produced

Fixed cost per year = $240,000

Variable cost = $3.50s

Where s = number of shoes produced

Total cost= fixed cost + variable cost

Total cost = $240,000 + $3.50s

When average cost = $7.50

Average cost = Total cost to produce / number of items produced

7.50 = $240,000 + $3.50s / s

Cross product

7.50s = $240,000 + $3.50s

Collect like terms

7.50s - 3.50s = 240,000

4s = 240,000

divide both sides by 4

s = 240,000 / 4

= 80,000

s = 80,000