The cost structure of Sackville Manufacturing Company (SMC)at two levels of production is as follows: 
Required:
a.Classify and explain each production cost as either strictly variable or strictly fixed or mixed
b.Determine the total production cost equation for SMC,using the units of production as the cost driver.(Be sure to identify clearly all the separate components of the equation. )
c.Explain what causes the drop in average cost per unit from $7.10 to $6.60 when production is increased from 60,000 to 80,000 units.Show all supporting calculations.
Definitions:
Accounts Receivable
Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.
Collection Period
The time frame it takes for a business to convert its credit sales into cash, reflecting how efficient a company is at collecting accounts receivable.
Net Present Value
The difference between the present value of cash inflows and the present value of cash outflows over a period of time. It is used to evaluate the profitability of an investment or project.
Default Rate
The proportion of loans or debt instruments that are not repaid as agreed, leading to default, within a specific period.
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