Harris Company manufactures a single product. Costs for the year 2015 for output

Question

Harris Company manufactures a single product. Costs for the year 2015 for output levels of 1,000 and 2,000 units are given in the table. At each level compute the following:

A. Total manufacturing costs

B. Manufacturing costs per unit

C.Total Variable cost

D. Total variable cost per unit

E. Total costs that have to be recovered if the firm makes a profit

Table:

Unit Produced 1000 2000 Direct labor $30,000 $60,000 Direct materials $20,000 $40,000 Overhead: Variable portion $12,000 $24,000 Fixed portion $36,000 $36,000 Selling and adm cost Variable portion $5,000 $10,000 Fixed portion $22,000 $22,000

Explanation / Answer

(a) Total manufacturing cost: Direct material + labor + Total overheads

At 1000 units: $(30,000 + 20,000 + 12,000 + 36,000) = $98,000

At 2000 units: $(60,000 + 40,000 + 24,000 + 36,000) = $160,000

(b) Manufacturing cost per unit

At 1000 units: $98,000 / 1000 = $98

At 2000 units: $160,000 / 2000 = $80

(c) Total variable cost = Direct material + Labor + variable overhead + Variable Selling cost

At 1000 units: $(30,000 + 20,000 + 12,000 + 5,000) = $67,000

At 2000 units: $(60,000 + 40,000 + 24,000 + 10,000) = $134,000

(d) Unit variable cost:

At 1000 units: $67,000 / 1000 = $67

At 2000 units: $134,000 / 2000 = $67

(e) Total cost to be recovered to make profit is the sum of all costs listed

= Total manufacturing cost + Total selling costs

At 1000 units: $(98,000 + 5,000 + 22,000) = $125,000

At 2000 units: $(160,000 + 10,000 + 22,000) = $192,000

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