CAT 2000 — DILR Question 30
Answer the following question based on the information given below.
ABC Ltd. produces widgets for which the demand is unlimited and they can sell all of their production. The graph below describes the monthly variable costs incurred by the company as a function of the quantity produced. In addition, operating the plant for one shift results in a fixed monthly cost of Rs. 800. Fixed monthly costs for second shift operation are estimated at Rs. 1200. Each shift operation provides capacity for producing 30 widgets per month.
Note : Average unit cost, AC = Total monthly costs/monthly production, and
Marginal cost, MC is the rate of change in total cost for unit change in quantity produced.
Total production in July is 40 units. What is the approximate average unit cost for July?
Answer & solution
- A
3600
- B
90
140
- D
115
Total monthly costs = Fixed Cost + Variable Cost
∴ Total monthly cost for the month of July = (800 + 1200) + 3600 = Rs. 5600
∴ Average unit cost = = Rs. 140
Hence, option (c).