1. The St. Jones Winery plans to open a new production facility in the Conila Valley of Puerto Rico. Based on the information provided by the accounting department, the company estimates the fixed costs of RM360,000 per year and the function of average variable costs as AVC = RM15 + RM0.02Q where AVC is average variable cost (in Ringgit Malaysia) and Q is output measured in cases per year.

(a)Estimate total costs and average total costs for the coming year at a projected volume of 2,500 cases.

(b)An increase in worker productivity due to learning resulted in a substantial cost savings for the company. Calculate the effect of learning if actual total cost was RM500,000 at an actual volume of 3,500 cases.