Suppose the Total Cost of Producing 40,000 Flash Drives Is

question 234

Essay

Suppose the total cost of producing 40,000 flash drives is $120,000, and the fixed cost is $30,000.
a.What is the variable cost?
b.When output is 40,000, what are the average variable cost and the average fixed cost?
c.Assuming the cost curves have the usual shape, is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain.

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Definitions:

Aging

A method used to categorize accounts receivable based on the length of time an invoice has been outstanding.

Accounts Receivable

Unpaid customer debts to a company for goods or services that have been supplied.

Bad Debts Expense

An expense reported on the income statement reflecting the cost of estimated uncollectible accounts receivable.

Net Credit Sales

Sales made on credit minus any sales returns or allowances, reflecting the actual credit sales revenue.