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For a luxury doughnut producer the average selling price is £2. The average variable cost is 40% of the selling price and its fixed cost per day is £300. Calculate total costs per day assuming it produces 400 doughnuts per day.

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Answer:

620

Step-by-step explanation:

selling 400 doughnuts means selling 800 £ worth of doughnuts. 800 x 0.4 ( to find 40 percent) = 320, + 300 because the the fixed cost = 620. :)

The total cost per day of producing 400 doughnuts is £620.

The total cost of producing doughnuts is the sum of fixed cost and variable cost. Fixed cost is the constant that remains constant regardless of the amount of doughnuts made. Variable cost is the cost that varies with the number of doughnuts made.

Total cost = fixed cost + variable cost

Fixed cost = £300

Variable cost = average variable cost x number of output

Average variable cost = 40% x £2

= 0.40 x £2 = 0.80

Variable cost = £0.80 x 400 = £320

Total cost = £320 + £300 = £620

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