Question

Cindy operates Birds-R-Us, a small store manufacturing and selling 100 bird feeders per month. Cindy's monthly total fixed costs are $500, and her monthly total variable costs are $2,500. If for some reason Cindy's fixed cost fell to $400, then her:________.

Answer 1

Answer:

average fixed costs per unit would decrease.

Explanation:

Currently Cindy's monthly total fixed costs = $500, and since it produces 100 units per month, the average fixed costs per unit = $500 / 100 units = $5 per unit.

If fixed costs fell to $400, then the average fixed costs per unit = $400 / 100 units = $4 per unit.

While her average variable costs remain the same = $2,500 / 100 units = $2.50 per unit