Emma owns a flower shop in tampa. she pays $3,091 per month to lease her building, $2,208 in wages, $1,887 for flowers and other supplies and she produces 662 flower arrangements per month.
emma's average fixed cost of production equals

a) $4.67 b) $23.01 c) $10.85 d) $6.18 e) $2.85

The correct answer is a) $4.67.

Explanation:

Emma's average fixed cost of production equals to 4.67 dollars.

To calculate average fixed cost we need to find which cost mentioned in the question meet the defination of fixed cost. Wages and supplies are variable costs so the only fixed cost in the question is lease rental of $ 3,091.

To calculate fixed cost average we will divide total fixed cost with produce followers.

AFC = 3.091/662  = $ 4.67

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