The following information provides the amount of cost incurred in May for the co
ID: 2374814 • Letter: T
Question
The following information provides the amount of cost incurred in May for the cost items indicated. During May 7,900 units of the firm's single product were manufactured.
How much cost would you expect to be incurred for each of these items during June when 9,900 units of the product are planned for production? (Do not round intermediate calculations and round your final answer to the nearest dollar amount. Omit the "$" sign in your response.)
Calculate the average total cost per unit for the 7,900 units manufactured in May. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
It is clear that not all costs can be classified as either variable or fixed. Some costs are partly fixed and partly variable. Sometimes costs with this mixed behavior pattern are called semivariable costs
A cost that has both fixed and variable elements%u2014a mixed cost.. Utilities for the factory, for example, have a mixed behavior pattern because when the plant isn't operating, some lights must be kept on for safety and security, but as production increases more electricity is required. Analytical techniques can break this type of cost into its fixed and variable components, and a cost formulaAn algebraic expression that reflects the fixed and variable elements of a cost. can be developed:
This cost formula then can be used to forecast the total cost expected to be incurred at various levels of activity. For example, assume that it has been determined that the fixed cost for utilities is $350 per month and that the variable rate for utilities is 30 cents per machine hour. Total estimated utilities cost for a month in which 6,000 machine hours were planned would be
Great care must be taken with the use of fixed cost per unit data because any change in the volume of activity will change the per unit cost. As a general rule, do not unitize fixed expenses because they do not behave on a per unit basis! For example, most costs of a university business office%u2014salaries, depreciation, and utilities%u2014are fixed; to calculate the %u201Ccost%u201D of cashing student checks by dividing a portion of business office costs by the number of checks cashed in a period of time will give a misleading result, as illustrated in Exhibit 12-4. Sometimes fixed costs must be unitized, as in the development of a predetermined overhead application rate (described in the next chapter). It is also important to recognize that the relevant range is often quite wide, and significant increases in activity can be achieved without increasing fixed costs (that is, economies of scale can result in efficiencies and a reduction of fixed cost per unit). However, whenever fixed costs are unitized, be very careful about the conclusions that may be drawn from the data.
The following information provides the amount of cost incurred in May for the cost items indicated. During May 7,900 units of the firm's single product were manufactured.
Explanation / Answer
Requirement 1:
How much cost would you expect to be incurred for each of these items during June when 9,900 units of the product are planned for production? (Do not round intermediate calculations and round your final answer to the nearest dollar amount. Omit the "$" sign in your response.)
Raw materials
$
Factory depreciation expense
Direct labor
Production supervisor's salary
Computer rental expense
Maintenance supplies used
Total cost
$
Requirement 2:
(a)
Calculate the average total cost per unit for the 7,900 units manufactured in May. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Average cost per unit
$
Requirement 1:
How much cost would you expect to be incurred for each of these items during June when 9,900 units of the product are planned for production? (Do not round intermediate calculations and round your final answer to the nearest dollar amount. Omit the "$" sign in your response.)
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