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Calculating Average Total Cost
easy

A small bakery produces 10 loaves of bread at a total cost of $50, which includes $20 in fixed costs and $30 in variable costs. If the bakery wants to know the average total cost (ATC) per loaf of bread, what should they calculate?

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Learning Path
Learning Path

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Choose the Best Answer

A

$5 per loaf

B

$3 per loaf

C

$2 per loaf

D

$8 per loaf

Understanding the Answer

Let's break down why this is correct

Answer

To find the average total cost (ATC) per loaf of bread, the bakery needs to divide the total cost by the number of loaves produced. In this case, the total cost is $50 for 10 loaves. So, they would calculate $50 divided by 10, which equals $5. This means that the average total cost for each loaf of bread is $5. Understanding ATC helps the bakery set prices and determine if they are making a profit or loss.

Detailed Explanation

To find the average total cost, divide the total cost by the number of loaves. Other options are incorrect because This answer might come from dividing only the variable costs; This option could be a mistake from thinking the cost is lower than it is.

Key Concepts

Average Total Cost (ATC)
Fixed and Variable Costs
Production Decisions
Topic

Calculating Average Total Cost

Difficulty

easy level question

Cognitive Level

understand

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