Refer to the Whitman Drycleaners in E6-46B. Assume that Whitman charges customers \($9\) per garment for dry cleaning. Prepare Whitman’s projected income statement if 4,220 garments are cleaned in March. First, prepare the income statement using the traditional format; then prepare Whitman’s contribution margin income statement.

Data From E6-46B:-

Whitman Drycleaners has the capacity to clean up to 6,000 garments per month.

Requirements:

1. Complete the following schedule for the three volumes shown.

2. Why does the average cost per garment change?
3. The owner, Ellen Whitman, uses the average cost per unit at full capacity to predict total costs at a volume of 3,000 garments. Would she overestimate or underestimate total costs? By how much?

Transcribed Image Text:

Total variable costs Total fixed costs Total operating costs Variable cost per garment Fixed cost per garment Average cost per garment 3,000 Garments 4,500 Garments 6,000 Garments $3,375 $2.40