Question

Permault Drycleaners has capacity to clean up to 5) garments per month 1. Complete the schedule bclow for thc threc vclumes shown 2. Why does the average cost per garrrient charige? 3. Suppose the owner, Derrick Perrault, erroneously uses the average cost per unit at fullcapacity to predict total costs at a volume of 1,500 garments. Would he overestimate or underestimate his total costs? By how much? 4,600 6,000 7,500 Garments Gar ments Garments ,600 Total variable costs Total fixed costs Total opcrating costs Variable cosl per garmert Fixed cost per gament Average cost per garmient Requirement 2. Why does tne average cost per garment change? The average cost per garment changes as volume chอnges due to the Requirement 3. Suppose the owner, Derrick Perrault, erroneously uses the average cost per unit at full capecity to predict total costs at a olume of 4,500 garments Would he overastimate or underestimate his total costs? By how much? He would 2.10 component of the dry cleaner's costs. The V cost per unit decreases as volume while the variable cost per unit his costs by Choose from any list or enter any number in the Input fields and then continue to the next question.

Answer 1

Garments unit	4,500	6,000	7,500
Total Variable cost	2,700	3,600	4,500
Total fixed cost	12,600	12,600	12,600
Total Operating cost	15,300	16,200	17,100
Variable cost per garment	0.60	0.60	0.60
Fixed cost per garment	2.80	2.10	1.68
Average cost per garment	3.40	2.70	2.28

The average cost of garments change because of the fixed costs. Fixed costs remain unchanged with the change in units.

he would be underestimating the cost per unit by (3.40-2.28) $1.12