Forecast costs at different volumes (Learning Objectives 1, 2)}

Perreth Drycleaners has capacity to clean up to 5,000 garments per month.

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