Question

Homework: Chapter 6 Homework Save 9 of 13 (8 complete) HW Score: 44.44%, 24 of 54 pts Score: 0 of 5 pts E6-20A (similar to) Question Help Pastore 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, Dennis Pastore, erroneously uses the average cost per unit at full capacity to predict total costs at a volume of 2,000 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.) 2,000 Garments 3,500 Garments $ 2,625 5,000 Garments Total variable costs Total fixed costs Total operating costs Variable cost per garment Fixed cost per garment Average cost per garment

Answer 1

	2000 garments	3500 garments	5000 garments
Total variable costs	1500	2625	3750
Total fixed costs	7700	7700	7700
Total operating costs	9200	10325	11450
Variable cost per unit garment	0.75	0.75	0.75
Fixed cost per garment	3.85	2.20	1.54
Average cost per garment	4.60	2.95	2.29

2.

Average cost per garment changes because of fixed cost.

3.

Actual cost = 9200

Predicted cost = 2000 X 2.29 = 4580

The cost is underestimated by 4620 (9200 - 4580)