What Are the Formulas for the Following Cost Concepts: Average

question 16

Essay

What are the formulas for the following cost concepts: average total cost, average fixed cost, average variable cost and marginal cost? Explain why the ATC and AVC curves get closer together as output increases.

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Definitions:

Equivalent Units

A concept used in cost accounting to represent the partial completion of goods in production, expressed in terms of fully completed units.

Molding Department

A specialized section in a manufacturing facility where raw materials are shaped into components through the molding process.

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units available for sale during the period.

Equivalent Units

A concept in cost accounting used to compute the costs associated with partially completed goods.