CMA Foundation · Fundamentals of Business Economics and Management · Cost of Production
A bakery in Pune produces 10 cakes at a total cost of ₹2,000. What is the average cost per cake?
The average cost per cake is ₹200. Average cost is total cost divided by the number of units produced, so ₹2,000 divided by 10 cakes gives ₹200. It measures the cost borne per unit of output, not the extra cost of one more unit.
- A₹100
- B₹200Correct
- C₹20
- D₹2,000
Explanation
Average cost = total cost / output = 2,000 / 10 = ₹200. Option ₹20 comes from dividing by 100 instead of 10, and ₹100 from dividing by 20 units, both wrong bases.
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