Preston Drycleaners has capacity to clean up to 7,500 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 Preston, erroneously uses the average cost per unit at full capacity to predict total costs at a volume of 4,500 garments. Would he overestimate or underestimate his total costs? By how much?

Transcribed Image Text:

7,500 6,000 Garments Garments Garments 4,500 Total variable costs Total fixed costs Total operating costs Variable cost per garment Fixed cost per garment Average cost per garment $5,100 $2.40