The Highest Value of Total Cost Was $75,000 in June

question 1

Multiple Choice

The highest value of total cost was $75,000 in June for Mantilla Beverages Inc.Its lowest value of total cost was $50,000 in December.The company makes a single product.The production volume in June and December were 13,000 and 8,000 units,respectively.What is the variable cost per month?

• A)$9.38 per unit
• B)$6.25 per unit
• C)$5.00 per unit
• D)$5.77 per unit

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Definitions:

Economies of Scale

The cost advantage achieved when production becomes efficient, as the scale of production increases, leading to a reduction in the average cost to make each unit.

Diseconomies of Scale

A situation where, as a firm becomes larger, its costs per unit increase due to inefficiencies that arise from its growth.

Constant Costs

The costs that remain unchanged as the level of output or production increases or decreases.