Rufus runs a skunk-skinning service in West Virginia. He employs skinners at a wage rate of $240 a week for each one. He leases the shack where his workers work for $200 per week. The rent is fixed for the next two years
Last week his 10 employees managed to skin a total of 300 skunks. a. What is the average product of labor for Rufus's company? b. What is Rufus's total variable cost per week? c. What is the average variable cost for Rufus's company? d. If Rufus adds his brother Jethro to his staff, at a wage rate of $240 a week, and his company can now skin 310 skunks per week, what is Rufus's new average variable cost?
a. The average product of labor is 30 skunks skinned per worker.
b. The total variable cost per week is $2,400.
c. The average variable cost is $8 per skunk skin.
d. The new total variable cost is $2,640. Hence the new average variable cost is $8.52 per skunk skin.
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