Cost Behavior: Estimate Most Profitable Operating Level: The following production and sales data are for a company division with a capacity of 13,000 units and an unchangeable unit sales price of $4.50. The company is required by a sales contract to keep the division operating and wants to operate at the optimal level given these conditions. The manufacturing vice president suggested: "We should operate at 13.000 units since that gives us the lowest unit cost."

What is the optimal level of output if production must take place at one of the levels indicated in this schedule?

Production Volume 10,000 11,000 12,000 13,000 Variable manufacturing cost $37.000 $40,800 $44,600 $48,400 Fixed manufacturing cost 9,000 9,000 9,000 9,000 Marketing costs Administrative costs Total costs Unit cost 6,000 6,600 7,200 7,800 6,000 6,000 6,200 6,400 $58,000 $62,400 $67,000 $71,600 $5.80 $5.67 $5.58 $5.51