These questions are part of the quantitative aptitude section and are often asked in entrance exams like **banking**, **management**, **law** and government exams like **UPSC**, **CDS**, **NDA** or **AFCAT**.

Table of Contents

## What is Average Cost?

The cost of a good or service is measured on an average basis. The average of these values will provide the average cost price when we have several products to sell or buy that are nearly equal in value. It helps shopkeepers in the buying and selling process.

The average cost is calculated as the sum of all product costs divided by the total number of products. We also use the word “average” in mathematics. The average of any given set of data is referred to as the “mean of the data.” In the context of business, where profit and loss are essential factors, it is asserted that the term “average” is appropriate.

## Average Cost Formula

The formula for calculating average cost is given by:

**Average cost = Total cost of the units/Number of units**

The average cost deals with the summation of arithmetic cost divided by the number of the quantity or the number of items given.

**The formula to calculate the average cost is given here. X = ∑(xi)/n**

*Where xi is the sum of all costs and n is the number of items.*

Please Note

*The symbol ‘∑’ (called sigma) is used to denote the summation.*

Also Read: **50+ Questions of Verbal Classification Reasoning with Answers**

## How to Calculate the Average Cost?

We have already talked about how to figure out the average cost. Let us look at an example to figure out the average price.

**Questions: Find the average cost of price of 11 bags whose prices are Rs. 500, Rs. 550, Rs. 450, Rs. 510, Rs. 520, Rs. 530, Rs. 540, Rs. 460, Rs. 470, Rs. 480, and Rs. 490.****Solution**: Given that the cost of 11 bags is:

Rs. 500, Rs. 550, Rs. 450, Rs. 510, Rs. 520, Rs. 530, Rs. 540, Rs. 460, Rs. 470, Rs. 480, and Rs. 490.

So we know, according to the average cost formula;**Average = Sum of all the cost of bags/Total number of bags**

A = (500+550+450+510+520+530+540+460+470+480+490)/11

A = 5500/11

A = 500

Therefore, Rs. 500 is the average cost of 11 bags.

## Average Cost and Marginal Cost

We know that average cost is the ratio of total cost to the quantity of manufactured goods according to its definition. The total cost, which is also referred to as the unit cost, is the total cost plus the variable cost.

Hence,

**Average cost = Total cost / Number of units = (Fixed cost + Variable cost) / Number of units**

Marginal cost, on the other hand, is the expense incurred as a result of a change in total cost brought on by an increase in the number of products. Hence, it is an additional cost because of the manufacturing of extra products.

Businesses benefit from knowing whether it is advantageous to produce more units of a product or not. The marginal cost is given by;

**MC = Change in cost/Change in quantity**

## Average Cost Questions – Solved

**A bag contains 5 balls which cost Rs.200. Find the average cost of each ball.****Ans. Cost of each ball Rs.40**

In the given question,

Average Cost (AC) =?

Total Cost (TC) = 200

Quantity (N) =5

We know, **AC = TC / N**

Substituting the values in the above we get:

AC= 200/5

AC= 40

Therefore, the cost of each ball is Rs.40

**I bought a pack of candies at an average cost of Rs. 2 per candy. Meanwhile the total cost of the whole pack was Rs. 50. Calculate how much candies are present in a pack.****Ans. 25 candies are present in the pack**

In the given question,

Average Cost (AC) = 2

Total Cost (TC) = 50

Quantity(N) =?

We know, **AC = TC / N**

Substituting the values in the above we get:

2 = 50 /N

N = 25

Hence, 25 candies are present in the pack

**Find the average cost of price of 5 chocolates whose prices are Rs.50, Rs.20, Rs.55, Rs. 45, Rs.60.****Ans. Rs. 46 is the average cost of 5 chocolates.**

In the given question,

The prices of chocolates are Rs. 50, Rs. 20, Rs. 55, Rs. 45, and Rs. 60.

N = 5

Formula: **Average cost = Sum of all the prices of chocolates / Total no. of chocolates**

AC= 50+20+55+45+60/5

AC = 230/5

AC= 46

Therefore, Rs. 46 is the average cost of 5 chocolates.

**Find the fixed cost of each box from six boxes whose average total cost is Rs. 300 and has a variable cost of Rs. 240.****Ans. The fixed cost of each box is Rs. 260.**

In the given question, we are provided with:

Variable cost (VC) = 240

Fixed cost (FC) =?

N = 6

Average total cost (ATC) = 300

Formula: **ATC = VC + FC / N**

Putting the value in the above formula, we get:

300 = 240+FC/6

1800-240 = FC

1560 = FC

Now, FC/6 = Fixed cost of each box

1560/6 = 260

Hence, the fixed cost of each box is Rs. 260.

**Find the cost of all ten buckets, where each bucket costs Rs. 100.****Ans. The cost of all ten buckets is Rs. 1000.**In the given question, we are provided with,

N =10

ATC = 100

TC =?

Formula:

**ATC = TC/N**

Substituting the values in the formula, we get,

100 = TC/10

TC = 1000

Hence, the cost of all ten buckets is Rs. 1000.

Engaging with these questions is instrumental in honing your analytical thinking, pattern recognition, and problem-solving skills. For more such **study material** on **Indian Exams**, check out **Leverage Edu**!