Perreth Drycleaners has capacity to clean up to 5,000 garments per month. Requirements 1. Complete the schedule below for the three volumes shown. 2. Why does the average cost per garment change? 3. Suppose the owner, Davis 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? Total variable costs Total fixed costs Total operating costs Variable cost per garment Fixed cost per garment Average cost per garment 2,000 3,500 Garments Garments $ $ 3.150 1.80 5,000 Garments C
Perreth Drycleaners has capacity to clean up to 5,000 garments per month. Requirements 1. Complete the schedule below for the three volumes shown. 2. Why does the average cost per garment change? 3. Suppose the owner, Davis 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? Total variable costs Total fixed costs Total operating costs Variable cost per garment Fixed cost per garment Average cost per garment 2,000 3,500 Garments Garments $ $ 3.150 1.80 5,000 Garments C
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
B1.
Transcribed Image Text:Perreth Drycleaners has capacity to clean up to 5,000 garments per month.
Requirements
1. Complete the schedule below for the three volumes shown.
2. Why does the average cost per garment change?
3. Suppose the owner, Davis 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?
Total variable costs
Total fixed costs
Total operating costs
Variable cost per garment
Fixed cost per garment
Average cost per garment
2,000
Garments
$
$
3,500
Garments
3,150
1.80
5,000
Garments
C
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