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

The plant manager's forecast would be

too high if he$/$she uses the

average cost per unit

to predict costs.

The

cost equation

is based on a mixed cost that will change as volume changes. If the manager uses this

method, he$/$she is erroneously assuming that the

average cost per unit

does not change at different volumes. The

manager should use the

cost equation

to predict costs since it correctly takes into account the variable and

fixed components of producing mailboxes.