Situation 22-2 Alejandro is one of the leading widget...

Situation 22-2 Alejandro is one of the leading widget producers in the country. His total costs amount to $4,500, total fixed costs are $1,050, and average total costs are $300. Refer to Situation 22-2. What are Alejandro's average variable costs at the present level of production? $325 $150 $230 $187 There is not enough information to answer the question.

Transcript

0:00 A few different parts here.

00:01 Let's get right to it.

00:02 It was the increase in average cost per widget.

00:05 Well, we can see $4 .55 per or $4 .90 .8 per.

00:12 So you do well subtraction and you will see what that difference is, which it looks like is $43.

00:22 So $43 was the difference in cost per widget from that kind of increase in price.

00:29 And so before, so we're looking at that first equation, they were sold for $8 each, which means we take our equation, i'll do it here where i have some rims for our equation, actually i'm not going to write e, you'll see why in a bit.

00:43 $4 .55, $4 .55 cents per widget plus $69 ,000.

00:51 This is the amount of money spent.

00:53 So the break -even point will be, if i spend $8 per widget and multiply that by the quantity, this is the amount earned, and all this over here is the amount spent.

01:04 So we need to find when those two things are equal.

01:06 So now we do our algebra.

01:08 Let's subtract 4 .55 from, or a q, 4 .555q from both sides of the equation, eliminating it over here and isolating the q over there.

01:18 Leaving us with 3 .45q equal to 69 ,000.

01:25 One more step.

01:27 Let's divide by 3 .45 on those sides of the equation.

01:33 And if i divide 69 ,000 by 3 .45, i kind of ran out of room, but i'll just say this.

01:38 The quantity is 20 ,000.

01:41 Now, that's actually not just it.

01:44 So i'll write first of all that answer here.

01:45 So it's super, super clear.

01:48 If it was $8 each, you actually have to also multiply that times 8.

01:52 So 20 ,000 widgets, or if i multiply that by $160 ,000 earned.

02:00 So those are both really part of that answer...

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