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    Dionell Jay Aguirre Al-os
    This document defines and provides examples of key production cost concepts: - Variable costs change with production volume while fixed costs remain constant. - Total cost is the sum of variable and fixed costs. Average and marginal costs are calculated based on total cost. - Total revenue is the price multiplied by the quantity sold. Profit is total revenue minus total costs. - Examples are provided to illustrate how to calculate each of these costs for a business producing banana cues at different quantities.

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    Uploaded by

    Dionell Jay Aguirre Al-os
    51 views12 pages
    This document defines and provides examples of key production cost concepts: - Variable costs change with production volume while fixed costs remain constant. - Total cost is the sum of variable and fixed costs. Average and marginal costs are calculated based on total cost. - Total revenue is the price multiplied by the quantity sold. Profit is total revenue minus total costs. - Examples are provided to illustrate how to calculate each of these costs for a business producing banana cues at different quantities.

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    Production costs

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    This document defines and provides examples of key production cost concepts: - Variable costs change with production volume while fixed costs remain constant. - Total cost is the sum of variable and fixed costs. Average and marginal costs are calculated based on total cost. - Total revenue is the price multiplied by the quantity sold. Profit is total revenue minus total costs. - Examples are provided to illustrate how to calculate each of these costs for a business producing banana cues at different quantities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    51 views12 pages

    Macro

    Uploaded by

    Dionell Jay Aguirre Al-os
    This document defines and provides examples of key production cost concepts: - Variable costs change with production volume while fixed costs remain constant. - Total cost is the sum of variable and fixed costs. Average and marginal costs are calculated based on total cost. - Total revenue is the price multiplied by the quantity sold. Profit is total revenue minus total costs. - Examples are provided to illustrate how to calculate each of these costs for a business producing banana cues at different quantities.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    PRODUCTION COSTS

     Variable cost
     Fixed cost
     Total cost
     Average TOTAL cost
     AVERAGE VARIABLE COST
     Marginal cost
     Total revenue
     profit
     VARIABLE COST
     is a kind of cost which changes in proportion to
    volume of production. If there is no production,
    there is no cost.
     Formula: VC=VC per Quantity x Quantity
     Example: P5 Banana Cue

    Quantity Variable Cost per Quantity Variable Cost


    ( VC per Q x Quantity)

    1 P5 P5x1=P5
    2 P5 P5x2=P10
    3 P5 P5x3=P15
    4 P5 P5x4=P20
    5 P5 P5x5=P25
     FIXED COST
     is a kind of cost which remains constant
    regardless of the volume of production. Even if
    there is no production, there is still cost.
     TOTAL COST
     is the sum total of production. Composed of
    wages,rents,interests, and normal profits.
     Formula TC=VC+FC
     Example: P5 per Banana Cue Gasul=P280 Fixed cost

    Quantity Variable Cost Fixed Cost Total Cost


    (VC price x Q) (VC+FC)
    1 P5 P280 P5+P280=P285
    2 P10 P280 P10+P280=P290
    3 P15 P280 P15+P280=P295
    4 P20 P280 P20+P280=P300
    5 P25 P280 P25+P280=P305
     AVERAGE TOTAL COST
     This is also called unit cost .It is equivalent to total
    cost divided by quantity.
     AC = TC
    • Q
    • Example: P5 Banana Cue Gasul=P280 Fixed
    Cost
    Quantity Total Cost Average Total Cost
    (VC+FC) (TC/Q)
    1 P285 P285/1=P285
    2 P290 P285/2=P145
    3 P295 P285/3=P98.33
    4 P300 P285/4=P75
    5 P305 P285/5=P61
     AVERAGE VARIABLE COST

     Is a variable cost divided by the quantity of


    output produced.

     AVC=VC
    Q
    Quantity Variable Cost Fixed Cost Average Variable
    (VC per Q x Q) Cost
    (VC/Q)
    1 P5 P280 P5/1=P5

    2 P10 P280 P10/2=P5


    3 P15 P280 P15/3=P5
    4 P20 P280 P20/4=P5
    5 P25 P280 P25/5=P5
     MARGINAL COST
     is the additional or extra cost brought about by
    producing one additional unit. It is obtained by
    dividing change in total cost by change in
    quantity.
     MC= A change in TC
     A change in Q
     Example P5 Banana Cue Gasul=P280 Fixed
    cost
    Quantity Total Cost Marginal Cost
    (VC+FC) (A change in Tc/a change in
    Q)
    1 P285 0
    2 P290 P5/1=P5
    3 P295 P5/1=P5
    4 P300 P5/1=P5
    5 P305 P 5/1=P5
     TOTAL REVENUE
     Is the result of the multiplication of
    price to the quantity.
     Example Given Price: P10

    Quantity Price TOTAL REVENUE


    (Price*Quantity)

    1 P10 P10x1=P10
    2 P10 P10x2=P20
    3 P10 P10x3=P30
    4 P10 P10x4=P40
    5 P10 P10x5=P50
     PROFIT
     Is the difference between the total revenue and the total
    cost.
     Formula P=TR-TC
     Example:
     VC=P5 per Banana Cue
     Given Price:P10 Fixed Cost Gasul P280
    Quantity Total Revenue Total Cost Profit/Loss
    (Price x Quantity) (VariableCost+Fixed (TR-TC)
    Cost)

    1 P10x1=P10 P5+280=P285 P10-P285=-275


    2 P10x2=P20 P10+280=P290 P20-290=P-270
    3 P10x3=P30 P15+280=P295 P30-P295=P-265
    4 P10x4=P40 P20+280=P300 P40-P300=P-260
    5 P10x5=P50 P25+280=P305 P50-305=P-255
    P5 PER BANANA CUE GASUL=P280 FIXED
    COST
    Quantit Variable Fixed Total Cost Average Total Average Marginal Cost
    y Cost Cost (VC+FC) Cost Variable (change in TC/
    VC per Q (TC/Q) Cost(VC/Q) change in Q
    xQ
    1 P5x1=P5 P280 P5+P280=P285 P285/1=P285 P5/1=P5 0

    2 P5x2=P10 P280 P10+P280=P29 P290/2=P145 P10/2=P5 P5/1=P5


    0
    3 P5x3=P15 P280 P15+280=P295 P295/3=P98.33 P15/3=P5 P5/1=P5

    4 P5x4=P20 P280 P20+280=P300 P300/4=P75 P20/4=P5 P5/1=P5

    5 P5x5=P25 P280 P25+280=P305 P305/5=P61 P25/5=P5 P5/1=P5


     TOTAL REVENUE AND PROFIT
     VC=P5 per Banana Cue
     Given Price:P10
     Fixed Cost: Gasul P280
    Quantity Total Revenue Total Cost Profit/Loss
    (Price x Quantity) (VariableCost+Fixed (TR-TC)
    Cost)

    1 P10x1=P10 P5+280=P285 P10-P285=-275


    2 P10x2=P20 P10+280=P290 P20-290=P-270
    3 P10x3=P30 P15+280=P295 P30-P295=P-265
    4 P10x4=P40 P20+280=P300 P40-P300=P-260
    5 P10x5=P50 P25+280=P305 P50-305=P-255
    THANK
    YOU

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