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The salespeople at Metlock, a notebook manufacturer, commonly pressured operations managers to keep costs down so the company

could give bigger discounts to large customers. Richard, the operations supervisor, leaked the $$0\mathrm{.}65$ total unit cost to salespeople, who

were thrilled, since that was slightly lower than the previous year's unit cost. Budgets were not yet finalized for the upcoming year, so

it was unclear what the target unit cost would be$.$ Richard knew the current year's operating capacity was two million notebooks, and

Metlock produced and sold just that many. The detailed breakdown of the $$0\mathrm{.}65$ total unit cost is as follows.

$($a$)$

Your answer is correct.

What were Metlock's total fixed costs? If the average selling price was $$2\mathrm{.}10,$ how much gross margin did the company generate?

Total fixed costs $

Gross margin $

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$($b$)$

Your answer is correct.

If Metlock incurs exactly the same total fixed costs but produces and sells only $1,600,000$ notebooks this coming year, what

happens to the fixed cost per unit? In turn, what would the total cost per unit be$?$ If the average selling price stays at $$2\mathrm{.}10,$ how

much gross margin would be earned? $($Round per unit answers to $2$ decimal places, e$.$g$.15\mathrm{.}25.)$

Fixed costs

by $

per unit

Total cost per unit

$

per unit

Gross margin

$

$($c$)$

If Metlock reworks its equipment layout and processes to increase the top end of its relevant range of activity to $2,500,000$

notebooks without incurring more fixed costs, what happens to the fixed cost per unit if it is able to make and sell that larger

quantity of units? $($Round per unit answers to $2$ decimal places, e$.$g$.15\mathrm{.}25.)$

Fixed costs

by $

per unit

Total cost per unit

$

per unit

Gross margin

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