Meat Packers, Incorporated (MPI) preserves and packages various kinds of meats for transportation to grocery stores. To prepare and transport each meat package to a grocery store, the firm must purchase $20 in raw meat and pay $90 in wages for labor and $40 in fuel costs. In addition, the firm rents a factory for $10,000 per month and makes $3,000 in monthly payments on meat packaging equipment. Suppose the firm prepares and transports 3,000 packages of meat per month. What are the firm's fixed and variable costs of production in a given month?

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ewomazinoade ewomazinoade · Answer 1 · 2019-12-18T10:31:13+01:00

Answer:

Fixed costs = $13,000

Variable costs = $450,000

Explanation:

Fixed costs are costs that do not vary with production. In this question, they are rent payments and monthly payments on meat packaging equipment.

Fixed cost = $10,000 + $3,000 = $13,000

Variable costs are costs that vary with production. In this question, they are the cost of purchase of raw meat, wages and fuel costs.

Variable costs = ($20 + $90 + $40) × 3000 = $450,000

I hope my answer helps you.