3) The controller for Andy's Bicycles has gathered the following cost and activity level information:

Average total cost per unit	$225.00
Production level used to calculate average cost	1,000
Total fixed costs	$80,000

a- What is the total cost of producing 1,000 racing bicycles?

b- What is the variable cost of producing each racing bicycle?

c- Suppose the controller uses the average cost to predict total costs. What total cost would the controller calculate for 2,500 racing bicycles?

d- If the controller uses the cost equation to predict total costs, what total cost would the controller calculate for 2,500 racing bicycles?

e- Is there a difference between the forecasted total cost using average cost versus the cost equation? If there is a difference, what creates the difference? If there is no difference, when would there be a difference?