Question

Pastore Drycleaners has capacity to clean up to 9,000 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, Darren Pastore, erroneously uses the average cost per unit at full capacity to predict total costs at a volume of 6,000 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.) 6,000 Garments 5000 7,500 Garments 5,625 9,000 Garments Total variable costs Total fixed costs Total operating costs

Answer 1

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4500 6000 Garments 9000 Garments Garments total variable cost 1$ 4500 $ 5625 A total fixed [$180000 $18000 [$180000 / Cost total operating $225001 $23625 $24750 Cost variable cost pero garment 6000 Garmente $0.75 45000 9000 Garments Gearments [$075 6075 fixed Cost per Grasment [$3.000. [$2.40 | 42.00]. Average cost per garment $3.75 3.15 12.75 INOTES. I variable cost pero garment - $5625 7500 2$0.75

d the average cost per garment Change because has the volume of the cleaning cloth increases, the yox.ed cost per garment decreases when the garments volume 6000, the fixed cost per goverment is $3.00 Then the volume of garment inereases to 7500 then the fixed cost pers garment is $240. per garnered When the garment volume is 900, the fixed lost per garment is $2.00. from the above we see that fixed cost decreases due to increase in volume of gourments, 3. row the owners wrongly uses the average rost per Unit hat full capacity un calculating total cost of volume 6000 garments Erroneous total cost C6000 x 2.75) 16500 Actual total cost (6Orox 3.75 ) 225 no T6000) he would underestimate his total cost by $6000