System 1: Cost = 1250 + 25x 14 [20 pointsl Two systems are being compared to dev

Question

System 1: Cost = 1250 + 25x
14 [20 pointsl Two systems are being compared to develop a small part of a diesel generator. The following equations apply: System represents the number of parts produced annually. annual production of 1000 pieces, i. What is the fixed cost for system 1 System 2: For an ii. What is the fixed cost for system 2 iii. What is the average cost per unit for system iii. What is the average cost per unit for system 2 v. What is the marginal cost for system 1 vi. What is the marginal cost for system 2 vii. What is the breakeven point in terms of parts produced at which the two systems have the same annual cost?

Explanation / Answer

14)1) Fixed cost is 1250. Fixed cost does not change.

2) Fixed cost for system 2 is 2150 .

3) We know that Total cost = Fixed cost + variable cost.

So, Average cost = avarage fixed cost + average variable cost.

or, Average cost = 1250 + 25 = 1275 per unit.

4) Average cost = 2150 + 21 = 2171 per unit.

5) marginal cost = dc/dx = 25

6) marginal cost = dc/dx = 20x.

7)

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