# Question

Acme Mailboxes produces decorative mailboxes. The company’s average cost per unit is $ 23.43 when it produces 1,400 mailboxes.

Requirements

1. What is the total cost of producing 1,400 mailboxes?

2. If $ 20,202 of the total costs are fixed, what is the variable cost of producing each mailbox?

3. Write Acme Mailboxes’ cost equation.

4. If the plant manager uses the average cost per unit to predict total costs, what would the forecast be for 1,600 mailboxes?

5. If the plant manager uses the cost equation to predict total costs, what would the forecast be for 1,600 mailboxes?

6. What is the dollar difference between your answers to Requirements 4 and 5? Which approach to forecasting costs is appropriate? Why?

Requirements

1. What is the total cost of producing 1,400 mailboxes?

2. If $ 20,202 of the total costs are fixed, what is the variable cost of producing each mailbox?

3. Write Acme Mailboxes’ cost equation.

4. If the plant manager uses the average cost per unit to predict total costs, what would the forecast be for 1,600 mailboxes?

5. If the plant manager uses the cost equation to predict total costs, what would the forecast be for 1,600 mailboxes?

6. What is the dollar difference between your answers to Requirements 4 and 5? Which approach to forecasting costs is appropriate? Why?

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