URGENT! How do you calculate for marginal cost against fixed cost. E.g., a company produces 2 pairs of shoes at $390.00. If it produces 1 more pair (making total production 3), total cost is $600.00. If no production is made, the fixed cost is $130. With this scenario, how do you compute for the marginal cost if it produces no shoes at the fixed rate indicated.
To calculate the marginal cost in this scenario, we need to understand the relationship between total cost, fixed cost, and variable cost.
Fixed cost is the cost that remains constant regardless of the level of production. In this case, the fixed cost is $130. This means that even if the company produces zero pairs of shoes, it still incurs this cost.
Variable cost, on the other hand, changes with the level of production. In this case, the variable cost is the difference between the total cost and the fixed cost. So, variable cost = total cost - fixed cost.
Let's calculate the variable cost for producing 3 pairs of shoes:
Total cost for producing 2 pairs of shoes = $390.00
Total cost for producing 3 pairs of shoes = $600.00
Variable cost = Total cost for producing 3 pairs of shoes - Total cost for producing 2 pairs of shoes
Variable cost = $600.00 - $390.00
Variable cost = $210.00
The variable cost is $210.00.
Now, to calculate the marginal cost, we need to determine the cost of producing one additional unit. In this case, it means finding the variable cost for producing one more pair of shoes.
Marginal cost = Variable cost / Number of additional units produced
Since we want to find the marginal cost if no shoes are produced, we need to find the variable cost of producing one more pair of shoes compared to producing zero pairs.
Marginal cost = Variable cost / Number of additional units produced
Marginal cost = $210.00 / 1 pair
Therefore, the marginal cost of producing no shoes at the fixed rate indicated is $210.00.