Generic Motors Company wants to estimate its fixed costs and unit variable costs

Question

Generic Motors Company wants to estimate its fixed costs and unit variable costs based on the following information for 2009. Its production volume for 2009 was 200 units.

unit VC= $

c) Based on the estimates from (b), what is the total cost of producing 235 units?
$

Generic Motors Company wants to estimate its fixed costs and unit variable costs based on the following information for 2009. Its production volume for 2009 was 200 units. Cost account Amount fixed/variable? Direct labor (1=fixed, 2=variable) direct materials (1=fixed, 2=variable.) depreciation (1-fixed. 2=2variable) rent (1=fixed, 2=variable) administrative staff salaries (1=fixed, 2=variable) Required: a) Classify each cost account above as fixed or variable (none of them is mixed). Enter your answers in the table above (enter 1 for fixed and 2 for variable costs) b) Estimate fixed costs and unit variable costs using account classification method: FC= dollar unit VC= $ c) Based on the estimates from (b), what is the total cost of producing 235 units? $

Explanation / Answer

a) Classify each cost account above as fixed or variable (none of them is mixed).
Enter your answers in the table above (enter 1 for fixed and 2 for variable costs)

Direct Labor = Variable
Direct Materials = Variable
Depreciation = Fixed
Rent = Fixed
Admin Staff Salaries = Fixed


b) Estimate fixed costs and unit variable costs using account classification method:
FC= $
unit VC= $

FC = (sum of all fixed costs) = 5,700 + 9,000 + 6,300 = $21,0000 <-- FC ANSWER

unit VC = DL=7,000 and DM=10,200 200 units

Want to find the labor cost per unit and the material cost per unit.

DL = 7,000 = 200x (solve for X)

x = 7,000/200 = $35 direct labor cost per unit <--DL ANSWER

DM = 10,200 = 200x (solve for x)

x = 10,200/200 = $51 DM per unit cost <---DM ANSWER

c) Based on the estimates from (b), what is the total cost of producing 235 units?
$

-We dont need to change the 21,000 for Fixed cost cause it does not change.

-Since we know the direct material cost per unit and the direct labor cost per unit we just multiple by the 235 units.

Total Cost = $35x + $51x + $21,000 (where x is 235)

TC = 35(235) + 51(235) + 21,000 = $8,225 + $11,985 + $21,000

TC = $41,210 <----TC ANSWER

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