\'ill AT&T; 2:41 PM mathxl.com Assignments Do Homework , jennifer sanchez ACG 20
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'ill AT&T; 2:41 PM mathxl.com Assignments Do Homework , jennifer sanchez ACG 2071 Fall 2017 nter sanchez 11/2/17 2:41 PM Homework: Ch. 8 Cost Behavior Sa Score: 0 of 1 pt 1 ot 6,0 complete. | Hw Score: 0%. 0of6 E6-21A (similar to) Question Help Pllard Drycleaners has capacity to clean up to 5,000 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, Donald Pillard, emoneously uses the average cost per unit at ful capacity to predict total costs at a volume of 2.000 garments Would he overestimabe 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.) 2,000 3,500 5,000 Garments Garments Garments Total variable costs Total fixed costs Total operating costs 3,150 Variable cost per garment Fixed cost per garment Average cost per garment 2.00Explanation / Answer
1. Total variable costs at 3,500 garments = 3,150
Variable cost per garment = 3,150/3,500 = 0.9
Fixed cost per garment at 3,500 garments = 2
Total fixed costs = 2*3,500 = 7,000
Variable costs per unit and the fixed costs in total remains the same upto full capacity.
2. Average cost per garment is equal to variable cost per garment plus fixed cost per garment.
Variable costs are the costs that changes in proportion to the changes in the volume. They remain fixed when measured on per unit basis
Fixed costs are the costs that remains fixed upto the full capacity and the fixed cost per unit changes inversely to the changes in volume.
Fixed cost per unit goes down when the level of activity changes.
As the fixed cost per unit changes with the level of activity the average cost per garmant changes.
3. Average cost at full capacity = 2.3
Predicted cost at 2,000 garments based on the average cost at full capacity = 2,000*2.3 = 4,600
Actual cost at 2,000 garments = 8,800
There is an understatement of 4,200(8,800-4,600).
2,000 Garments 3,500 Garments 5,000 Garments Total variable costs(a) 1,800(2,000*0.9) 3,150(3,500*0.9) 4,500(5,000*0.9) Total fixed costs(b) 7,000 7,000 7,000 Total operating costs(c) = (a+b) 8,800 10,150 11,500 Variable cost per garment(d) 0.9 0.9 0.9 Fixed cost per garmant(e) 3.5(7,000/2,000) 2(7,000/3,500) 1.4(7,000/5,000) Average cost per garment(f) = (d+e) 4.4 2.9 2.3Related Questions
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