Plowin' supply plans to make 15,000 tractors at its plants. fixed costs are $600,000 and variable costs are $200 per tractor. what is the average cost per tractor? (a) $200(b) $240(c) $40(d) $75

b) 240

Explanation:

The fixed costs to the production of the tractors are $600.000, independently  if the company makes 1 or none tractor, the company must spend $600.000 variable cost are attached to the number of tractors that the company will make. In this case the company will produce $15.000 and the variable cost is $200, its a reason why you must multiply those numbers. Excersise:

Total cost of produce n tractor = fixed costs+( number of tractors * variable cost)

where n = 15.000

Total cost of produce n tractor =$600.000+(15.000*$200)

Total cost of produce n tractor =$600.000+ ($3.000.000)

Total cost of produce 15.000 tractors = 3.600.000

Now that you have the total cost, you have to divide in the number of tractor to fin the average cost per quantity:

Average cost=  (Total cost of 15.000 tractors/number of tractors)

Average cost= (3.600.000/15.000)= $240

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a

explanation:

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