fixed costs
Question
A silver mine can yield 13,000 ounces of silver at a variable cost of $32 per ounce. The fixed costs of operating
the mine are $52,000 per year. In half the years, silver can be sold for $48 per ounce; in the other years, silver can be sold for only $24 per ounce. Ignore taxes.
| b. | Now suppose you can shut down the mine in years of low silver prices. Calculate the average cash flow from the mine. Assume fixed costs are incurred only if the mine is operating. (Do not round intermediate calculations.) |
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