Read the passage carefully and answer the questions based on the passage:
Macroeconomic Variables
Akriti Manufacturing Company produces flower vases. The cost of production for 100 vase includes rent of Rs. 10,000, salary for permanent staff of Rs. 10,000, cost of Labour Rs. 12,000 and Raw material of Rs. 18,000. Due to increased demand of vases the company plans to increase production to 200 vases. The variable cost per vase remains Rs. 300 and the fixed cost does not change.
What will be the average variable cost (AVC) for producing 200 vases?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 300
AVC = Total Variable Cost ÷ Quantity of Output
Given:
-
Variable cost per vase = 300
-
Number of vases = 200
So,
Total Variable Cost = 300 × 200 = 60,000
AVC = 60,000 ÷ 200 = 300