Cost Calculations:
Using the above abbreviations and Q for the quantity of output:
ATC = TC/Q

**ESTIMATION OF COST:**

**Cost Calculations**

Using the
above abbreviations and Q for the quantity of output:

ATC =
TC/Q

AFC =
TFC/Q

AVC =
TVC/Q

MC =
change in TC/change in Q

Example:
Let’s suppose you are making 50 bottles of wine each week. You know that your
fixed costs add up to $300, and your variable costs amount to $900. You also
know that if you were to make extra 5 bottles, your total cost would rise by
$60. What is your total cost; average total cost; average total cost; average
variable cost; average fixed cost; and marginal cost?

Answer:
Total cost = $300 + $900 = $1200 ATC = $1200/50 = $24

AVC =
$900/50 = $18

AFC =
$300/50 = $6 MC = $60/5 = $12

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Engineering Economics and Financial Accounting : Production Function and Cost Anaysis : Estimation of Cost |

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