The controller for Truman Canoes has gathered the following cost and activity level information:
$$\begin{array} { | l | r | }
\hline \text { Average total cost per unit } & \$ 300.00 \
\hline \text { Production level used to calculate average cost } & 2,000 \
\hline \text { Total fixed costs } & \$ 100,000 \
\hline
\end{array}$$ a.What is the total cost of producing 2,000 fiberglass canoes?
b.What is the variable cost of producing each fiberglass canoe?
c.Suppose the controller uses the average cost to predict total costs.What total cost would the controller calculate for 3,000 fiberglass canoes?
d.If the controller uses the cost equation to predict total costs,what total cost would the controller calculate for 3,000 fiberglass canoes?
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?

Question

The controller for Truman Canoes has gathered the following cost and activity level information:
 $$\begin{array} { | l | r | } 
\hline \text { Average total cost per unit } & \$ 300.00 \
\hline \text { Production level used to calculate average cost } & 2,000 \
\hline \text { Total fixed costs } & \$ 100,000 \
\hline
\end{array}$$ a.What is the total cost of producing 2,000 fiberglass canoes?
b.What is the variable cost of producing each fiberglass canoe?
c.Suppose the controller uses the average cost to predict total costs.What total cost would the controller calculate for 3,000 fiberglass canoes?
d.If the controller uses the cost equation to predict total costs,what total cost would the controller calculate for 3,000 fiberglass canoes?
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?

Quizplus · Accepted Answer

The Answer of  The controller for Truman Canoes has gathered the following cost and activity level information:
 $$\begin{array} { | l | r | } 
\hline \text { Average total cost per unit } & \$ 300.00 \
\hline \text { Production level used to calculate average cost } & 2,000 \
\hline \text { Total fixed costs } & \$ 100,000 \
\hline
\end{array}$$ a.What is the total cost of producing 2,000 fiberglass canoes?
b.What is the variable cost of producing each fiberglass canoe?
c.Suppose the controller uses the average cost to predict total costs.What total cost would the controller calculate for 3,000 fiberglass canoes?
d.If the controller uses the cost equation to predict total costs,what total cost would the controller calculate for 3,000 fiberglass canoes?
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?

The Controller for Truman Canoes Has Gathered the Following Cost