MGMT 1000 Lecture Notes - Lecture 1: Average Variable Cost, Average Cost, Lemonade Stand

• School: University of Guelph
• Department: Management
• Course: MGMT 1000
• Professor: Kathleen Rodenburg

Document Summary

Define fixed cost, variable and total cost in the context of the production process. Write an equation to illustrate the relationship between these three costs. Give an example to demonstrate your understanding of these different costs. Fixed cost costs that remain the same regardless of the change of quantities produced of any good or service. Your fixed costs would be the wood, nails, hammer to make your stand because you only need to make the stand once. Variable cost costs that vary depending on the quantity produced of a good or service. Example the variable costs to operate the lemonade stand businesses would be the lemons, water, ice, etc. you need to purchase over and over again to make the lemonade. Total cost the total amount of expenses in the production of a good or service. fixed cost expenses added together. Equation fixed cost + variable cost = total cost.