calculate AC , AVC, AMOUNT OF PRO FIT firm earns


wage bill 20000
value of raw materials 60000
interest 6000
fuel consumption 10000
rent 4000
units of output produced 2000

if it sell the entire output at Rs 60 per unit

Wages, purchases and power and fuel are variable costs as they vary directly with level of output.

Interest and rent are fixed cost as they are bound to be paid whether the output is increasing, decreasing or even zero.

TVC = Wages+Raw materials+Fuel
= 20000+60000+10000
= Rs 90000
AVC = TVC ÷ Q
= 90000 ÷ 2000 = Rs 45
TFC = Interest + Rent
= 6000+4000
= Rs 10000
TC = TFC + TVC
= 90000 + 10000
= Rs 100000
Selling price (SP) = 60 × 2000
= Rs 120000
Profit = 120000 - 100000
= Rs 20000

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