CAT 2000 Question Paper Question 34
Answer these questions based on the following Information:
ABC Ltd. produces widgets for which the demand is unlimited and they can sell all of their production. The graph below describes the monthly variable costs incurred by the company as a function of the quantity produced. In addition, operating the plant for one shift results in a fixed monthly cost of Rs. 800. Fixed monthly costs for second shift operation are estimated at Rs. 1200. Each shift operation provides capacity for producing 30 widgets per month.
Note: Average unit cost, AC = Total monthly costs/monthly production, and Marginal cost MC is the rate of change in total cost for unit change in quantity produced.
From the data provided it can be inferred that, for production levels in the range of 0 to 60 units,
As the graph is an increasing function, MC will always increase for increase in number of units.
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haki :
2 years, 8 months ago
sir, can you please explain why we are not considering fixed cost because if we do then. while calculating mc for 31 units it comes up to almost 1200+ but when we count mc for 32 units it comes down to almost 80 something