Overview
Calculating Average Total Cost (ATC) is essential for businesses to understand their cost structure and make informed pricing decisions. ATC is derived from dividing total costs by the number of units produced, encompassing both fixed and variable costs. By analyzing ATC, businesses can identify how...
Key Terms
Example: If a factory spends $1000 on rent and $500 on materials, the total cost is $1500.
Example: Rent for a factory remains the same regardless of how many products are made.
Example: The cost of raw materials increases as more products are produced.
Example: If total costs are $2000 for 100 units, the cost per unit is $20.
Example: If a product sells for $30 and costs $20 to make, the profit margin is $10.
Example: Producing 1000 units may lower the cost per unit compared to producing 100 units.