Grand dash Cola

Grand-Cola spends $ 1.50

$1.50 on directmaterials, directlabour, and variable manufacturing overhead for every unit(12-pack ofsoda) it produces. Fixed manufacturing overhead costs $ 6

$6 million per year. Theplant, which is currently operating at only 70

70% ofcapacity, produced 15

15 million units this year. Management plans to operate closer to full capacity nextyear, producing 20

20 million units. Management does not anticipate any changes in the prices it pays formaterials, labour, and manufacturing overhead.

a.

What is the current total product cost(for the 15

millionunits), including fixed and variablecosts?

b.

What is the current average product cost perunit?

c.

What is the current fixed cost perunit?

d.

What is the forecasted total product cost next year(for the 20

millionunits)?

e.

What is the forecasted average product cost nextyear?

f.

What is the forecasted fixed cost perunit?

g.

Why does the average product cost decrease as productionincreases?