Solution
4500 | 6000 | 7500 | |
Garments | Garments | Garments | |
Total Variable Cost | $ 4,275.00 | $ 5,700.00 | $ 7,125.00 |
Total Fixed Cost | $ 12,600.00 | $ 12,600.00 | $ 12,600.00 |
Total Operating Cost | $ 16,875.00 | $ 18,300.00 | $ 19,725.00 |
Variable Cost per Garment | $ 0.95 | $ 0.95 | $ 0.95 |
Fixed Cost Per Garment | $ 6.30 | $ 2.10 | $ 2.52 |
Average Cost Per Garment | $ 7.25 | $ 3.05 | $ 3.47 |
..
Requirement 2
Average cost per garment change because the fixed cost in total remains the same. When fixed cost remains same the fixed cost per unit changes as the units sold change. The change in fixed cost per unit is the reason average cost per unit change.
Requirement 3
Understate by $1,260
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