Best Birdies produces ornate birdcages. The company’s average cost per unit is $

Question

Best Birdies produces ornate birdcages. The company’s average cost per unit is $23 when it produces 2,300 birdcages. If $5,900 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 3100 birdcages will be? (Round intermediate calculations to the nearest cent and the final answer to the nearest dollar.) Best Birdies produces ornate birdcages. The company’s average cost per unit is $23 when it produces 2,300 birdcages. If $5,900 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 3100 birdcages will be? (Round intermediate calculations to the nearest cent and the final answer to the nearest dollar.)

Explanation / Answer

Average cost=Total cost/Total units

Hence total costs=(23*2300)=$52900

Hence variable costs=(52900-5900)=$47000

Hence variable cost/unit=(47000/2300)=$20.43/unit(Approx)

Hence total cost for 3100 birdcages=5900+(20.43*3100)=$69233

[Total fixed costs and variable cost/unit do not change with change in units].

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