1.
Feathered Nests produces decorative birdhouses. The company’s average total cost per
unit is $20.00 when it produces 2,000 birdhouses. If $4704 of the costs are fixed, and the
plant manager uses the cost equation to predict total costs, his forecast for 2233 birdhouses
will be:
(Input your number without dollar signs or commas. Round your final answer to the
nearest whole number. DO NOT round any numbers in doing your calculations other than
your final answer)
Solution
Solution:
Total cost per unit = $ 20 per unit
Total Cost = Fixed Cost + Variable cost per unit
Total cost for 2,000 birdhouses = $ 20 * 2,000 birdhouses
= $ 40,000
Fixed cost = $ 4,704
Variable cost per unit = $ 40,000 - $ 4,704
= $ 35,296
Per unit Variable cost = $ 35,296 / 2,000 units
= $ 17.648
The cost equation is
$ 17.648* number of units + $ 4,704 ( Fixed cost )
Cost for 2233 birdhouses -

2.
$ 17.648 * 2233 birdhouses + $ 4,704
= $ 44,111.984, or
= $ 44, 112