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The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale. This gives a weighted-average unit cost that is applied to the units in the ending inventory. There are two commonly used average cost methods: Simple weighted-average cost method and perpetual weighted-average cost method. [2]
Jane sells machines A and C for 20 each. Her cost of goods sold depends on her inventory method. Under specific identification, the cost of goods sold is 10 + 12, the particular costs of machines A and C. If she uses FIFO, her costs are 20 (10+10). If she uses average cost, her costs are 22 ( (10+10+12+12)/4 x 2).
A long-run average cost curve is typically downward sloping at relatively low levels of output, and upward or downward sloping at relatively high levels of output. Most commonly, the long-run average cost curve is U-shaped, by definition reflecting economies of scale where negatively sloped and diseconomies of scale where positively sloped.
Economists tend to analyse three costs in the short-run: average fixed costs, average variable costs, and average total costs, with respect to marginal costs. The average fixed cost curve is a decreasing function because the level of fixed costs remains constant as the output produced increases.
Let's compare two examples of investing $12,000: dollar-cost averaging over 12 months versus investing it all at once. ... That’s because the lower average cost per share — $41 vs. $50 ...
On Sept. 1, Costco hiked the price of its Gold Star membership by $5 to $65 and the price of its Executive membership by $10 to $130. This was the first full quarter since the price hike.
A firm making profits in the short run will nonetheless only break even in the long run because demand will decrease and average total cost will increase, meaning that in the long run, a monopolistically competitive company will make zero economic profit. This illustrates the amount of influence the company has over the market; because of brand ...
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