Question
In: Accounting
Please explain the answer step by step: Computing Average Unit Costs The total monthly operating costs...
Please explain the answer step by step:
Computing Average Unit Costs
The total monthly operating costs of Chili To Go are:
$8,000+ $0.30X
where
X = servings of chili
(a) Determine the average cost per serving at each of the following
monthly volumes: 100; 1,000; 5,000; and 10,000.
Round answers to one decimal place.
| Volume | Average Unit Cost |
|---|---|
| 100 | $Answer |
| 1,000 | $Answer |
| 5,000 | $Answer |
| 10,000 | $Answer |
(b) Determine the monthly volume at which the average cost per
serving is $0.70.
Answer servings of chili
Solutions
Expert Solution
| (a) | Determination of the average cost per serving at each of the following monthly volumes: 100; 1,000; 5,000; and 10,000:- | |||||
| The total monthly operating costs of Chili To Go are : | $8,000+ $0.30X | |||||
| where | X = servings of chili | |||||
| Variable Cost per product:- | ||||||
| Volume of Serving | Total monthly operating costs | Average cost per serving | ||||
| X | Equation | Calculation | Amount | |||
| a | b | c | d | e =d/a | ||
| 100 | $8,000+ $0.30X | $8,000+ $0.30(100) | $ 8,030 | $ 80.3 | ||
| 1000 | $8,000+ $0.30X | $8,000+ $0.30(1000) | $ 8,300 | $ 8.3 | ||
| 5000 | $8,000+ $0.30X | $8,000+ $0.30(5000) | $ 9,500 | $ 1.9 | ||
| 10000 | $8,000+ $0.30X | $8,000+ $0.30(10000) | $ 11,000 | $ 1.1 | ||
| (b) | Determination of the monthly volume at which the average cost per serving is $0.70:- | |||||
| Average cost per serving | = | $ 0.70 | ||||
| Total monthly operating costs | = | $ 0.70 | ||||
| Volume of Serving | ||||||
| $8,000+ $0.30X | = | $ 0.70 | ||||
| X | ||||||
| $8,000+ $0.30X | = | $ 0.70X | ||||
| $8,000 | = | $ 0.70X - $0.30X | ||||
| $8,000 | = | $ 0.40X | ||||
| X | = | $8,000 | ||||
| $0.40 | ||||||
| X | = | 20000 | Servings of Chili | |||
| The monthly volume at which the average cost per serving is $0.70 is 20,000 servings of Chili | ||||||
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