Perreth Drycleaners has capacity to clean up to 5,000 garments per month.
Requirements
1. Complete the following schedule for the three volumes shown.

2. Why does the average cost per garment change?
3. Suppose the owner, Dan Perreth, 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?

Transcribed Image Text:

2,000 Garments 3,500 Garments 5,000 Garments Total variable costs Total fixed costs Total operating costs $2,625 Variable cost per garment Fixed cost per garment Average cost per garment 2.00