Dividing total variable cost by quantity of output gives
Answer Details
Dividing the total variable cost by the quantity of output gives the average variable cost (AVC). Variable costs are costs that vary with the level of production, such as the cost of raw materials and labor. The total variable cost is the sum of all variable costs incurred to produce a certain quantity of output. The average variable cost is found by dividing the total variable cost by the quantity of output produced. It represents the cost per unit of producing a certain quantity of output, and is important in determining the profitability of a product or service. If the average variable cost is higher than the price at which the product is being sold, the producer is making a loss on each unit produced. Therefore, it is important to keep the average variable cost as low as possible to maximize profits.