Best Birdies produces ornate birdcages. The company's average cost per unit is $22 when it produces 2700 birdcages. If $5700 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 3500 birdcages will be

$75,315

Explanation:

Given the following ;

Average cost per unit = $22,when Total unit = 2700

Fixed cost(FC) = $5700

Variable Cost(VC)

In other to use the cost function in determining the total cost of 3500 unit, we need to determine the following ;

Total Cost{TC) of 2700 units :

unit size × average price per unit

2700 × $22 = $59,400

TC = $59,400

Cost equation :

TC = VC(unit size) + FC

$59,400 = VC(2700) + $5700

VC = $53,700 ÷ 2700

Variable Cost(VC) per unit = $19.89

Using the cost function ;

We can project the fixed cost when unit size = 3500

TC = VC(unit size) + FC

TC = $19.89(3500) + $5700

FC = $ 696615 + $5700

FC = $75,315