Question

Question 2: Engle sells chess sandwiches. The cost of ingredients (bread, meat, spices, etc.) to make a sandwich is $2. Engle pays her employees $60 per day. She also incurs a fixed cost of $120 per day. a) Calculate Engle's variable cost per day when she produces 50 sandwiches using two workers? b) Calculate Engle's average fixed cost per day when she produces 50 sandwiches using two workers? c) What is Engle's total cost per day when she does not produce any sandwiches and does not hire any workers?

Answer 1

Question 2) a) Variable cost is the cost that increases as the output increases. It is dependent on the number of units produced. Number of workers and the ingredients for sandwich are variable inputs because they can be changed according to the production process.

So, Engle’s variable cost per day when she produces 50 sandwiches using 2 workers =

= 2*50 + 60*2

= $220.

b) Engle’s average fixed cost per day when she produces 50 sandwiches using 2 workers =

Total fixed cost / Number of sandwiches

= $120 / 50

= $2.4

c) Engle’s total cost per day when she does not produce any sandwiches and does not hire any workers =

When nothing is produced, then no worker needs to be hired and the only cost will be the fixed cost. So, the total cost per day will be $120.

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