Now assume that you are considering expanding your company by buying more capita

Question

Now assume that you are considering expanding your company by buying more capital goods (buildings, machines, and tools). If your pany were larger (meaning that it had more capital goods, total fixed cost would increase from $180,000 to $210,000. However, you purchased would reduce your need for workers. Therefore, your total com labor costs would decrease because the capital goods that variable cost would decrease by $5,000 per home, as shown in the table. Quantity Total Variable Cost Total Fixed Cost Total Cost $155,000 290,000 405,000 540,000 695,000 870,000 1,065,000 1,280,000 1,515,000 1,770,000 210,000 $210,000 210,000 365,000 210,000 210,000 615,000 210,000 210,000 905,000 210,000 1,080,000 210,000 1,275,000 210,000 1,490,000 210,000 1,725,000 210,000 1,980,000 750,000 10 6.2. Calculate the new average total cost if you build 10 houses Please enter a whole number, with no decimal point.

Explanation / Answer

ATC = TC/Q

When Q = 10,

ATC = 1980,000/10

ATC =$198,000

Thus, ATC of building 10 homes is $198,000

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