E5-2 Determining Cost Behavior and Calculating Expected Cost [LO 5-1 Morning Dov

Question

E5-2 Determining Cost Behavior and Calculating Expected Cost [LO 5-1 Morning Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0-1,800 units, and monthly production costs for the production of 1,400 units follow. Morning Dove's utilities and maintenance costs are mixed with the lied mponents shown in parentheses. Production Costs Direct materiab Direct labor Utiities ($160 fixed) Supervisor's salary Maintenance ($260 fixed) Depreciatkon Total Cost $2,900 6,900 550 2,900 480 Required: 1. Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit or combination thereof). (Round your per unit value to 2 decimal places.) n Costs Behavior Rate Direct Materials Direct latar Util.ies Supervisor's Salary per Unit per Unil per Unit per Unit per Uriil per Unit per Month per Monh per Monlh per Mantth per Month per Month 2. Determine the total fixed cost per month and the variable tost per unit for Morning Dove. (Round your variable cost per unit to 2 decimal places.) Total Varñable Cost per Unit Total Fixed Cost per Month

Explanation / Answer

1 Determining Cost Behavior ProductionCosts Behavior Rate Hint Direct materials Variable $ 2.07 per unit                -   per month 2900/1400 Direct labor Variable $ 4.93 per unit                -   per month 6900/1400 Utilities ($160 fixed) Mixed $ 0.28 per unit            160 per month (550-160)/1400 Supervisor's Salary Fixed $    -   per unit         2,900 per month Maintenance ($260 fixed) Mixed $ 0.16 per unit            260 per month (480-260)/1400 Depreciation Fixed $    -   per unit            800 per month 2 Direct materials $      2.07 Direct labor $      4.93 Utilities $      0.28 Maintenance $      0.16 Total Variable Cost/unit $      7.44 Utilities $160 Supervisor's Salary $2,900 Maintenance $260 Depreciation $800 Total Fixed Cost/Month $4,120 3 Total Cost = $4,120 + $7.44(# birdbaths produced) 4 Total Cost = $4,120 + $7.44(1,600) = $16,024

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