Pillard Drycleaners has capacity to clean up to 5,500 garments per month.
Requirements
1.
Complete the schedule below for the three volumes shown.
2.
Why does the average cost per garment change?
3.
Suppose the owner, Derrick Pillard, erroneously uses the average cost per unit at full capacity to predict total costs at a volume of 2,500 garments. Would he overestimate or underestimate his total costs? By how much?
Requirement 1. Complete the following schedule for the three volumes shown. (Round all unit costs to the nearest cent and all total costs to the nearest whole dollar.)
2,500
4,000
5,500
Garments
Garments
Garments
Total variable costs
$3,800
Total fixed costs
Total operating costs
Variable cost per garment
Fixed cost per garment
$2.20
Average cost per garment
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