What is its average fixed cost?
At Q = 10, average fixed cost is or ($190,000). e. Suppose the company borrows money and expands its factory. Its fixed cost rises by $50,000, but its variable cost falls to $45,000 per 10,000 units. The cost of interest (I) also enters into the equation. Each one-point increase in the interest rate raises costs by $30,000. Write the new cost equation. Fixed cost changes from 190 to 195. Variable cost decreases from 53 to 45. Fixed cost also includes interest charges: 3I.
