Labor expense per head of hogs sold is an example of which cost concept?

Labor expense per head of hogs sold is an example of which cost concept?

• A. Average Cost
• B. Fixed Cost
• C. Variable Cost
• D. Marginal Cost

Answer: (A)

Labor expense per head of hogs sold represents a unit cost, calculated by taking the total labor cost allocated to producing or selling hogs and dividing it by the number of hogs sold. This yields the cost per hog, which is exactly what average cost measures: the cost per unit of output when you spread total costs over the quantity produced. It isn’t fixed cost, because fixed costs don’t change with production and per-head figures would automatically shift as you increase or decrease output. It isn’t marginal cost, which is the cost of producing one more unit rather than the average cost over all units. And while labor can be a variable cost, the per-head figure specifically expresses the cost per unit, i.e., the average cost per hog.

Labor expense per head of hogs sold represents a unit cost, calculated by taking the total labor cost allocated to producing or selling hogs and dividing it by the number of hogs sold. This yields the cost per hog, which is exactly what average cost measures: the cost per unit of output when you spread total costs over the quantity produced.

It isn’t fixed cost, because fixed costs don’t change with production and per-head figures would automatically shift as you increase or decrease output. It isn’t marginal cost, which is the cost of producing one more unit rather than the average cost over all units. And while labor can be a variable cost, the per-head figure specifically expresses the cost per unit, i.e., the average cost per hog.