I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was

Question 12 options:

a)

$1.60

b)

$3.00

c)

$2.00

d)

$1.80

To find the average fixed cost (AFC) of producing 8,000 specialty pizzas, we need to use the following formula:

\[
AFC = \frac{\text{Total Fixed Costs}}{\text{Quantity of Pizzas Produced}}
\]

First, we calculate the total fixed costs. We know the total cost is $40,000, and the variable cost is $24,000, so the fixed cost is:

\[
\text{Total Fixed Costs} = \text{Total Cost} - \text{Variable Cost} = 40,000 - 24,000 = 16,000
\]

Now, the average fixed cost is:

\[
AFC = \frac{16,000}{8,000} = 2.00
\]

So, the correct answer is:

**c) $2.00**

Would you like more details or have any questions? Here are some related questions to consider:

1. How are fixed costs different from variable costs?
2. What happens to AFC if the production quantity increases?
3. How do variable costs per unit behave with changes in production volume?
4. How can a company reduce its average fixed cost?
5. How does total cost change when only variable costs increase?

**Tip:** Remember, average fixed costs decrease as production increases because the fixed cost is spread over more units.

I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage, and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was:

a) $1.60
b) $3.00
c) $2.00
d) $1.80

Learn how to calculate the average fixed cost for I'MaPizzaCo's pizza production. With 8,000 specialty pizzas produced, explore key cost accounting concepts, including total and variable costs, using detailed formulas and solutions. Suitable for high school students and those studying cost analysis.

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