The following data have been extracted from the records of Puzzle, Inc.: Require
ID: 2406233 • Letter: T
Question
The following data have been extracted from the records of Puzzle, Inc.:
Required:
a. Calculate the missing costs. (Do not round intermediate calculations.)
b. Calculate the cost formula for mixed cost using the high-low method. (Do not round intermediate calculations. Round "Variable cost" to 2 decimal places.)
cost formula _____ + _____ per unit
c. Calculate the total cost that would be incurred for the production of 16,949 units. (Do not round intermediate calculations.)
Total cost ____
d. Identify the two key cost behavior assumptions made in the calculation of your answer to part c.
cost behavior pattern is ____ relevant range ____
February August Production level, in units 11,800 25,960 Variable costs $ 33,040 $ ? Fixed costs ? 32,500 Mixed costs 29,120 ? Total costs $ 94,660 $ 161,212Explanation / Answer
Answer a.
February:
Production level = 11,800 units
Variable Costs = $33,040
Variable Costs per unit = $33,040 / 11,800
Variable Costs per unit = $2.80
Fixed Costs = $32,500
Mixed Costs = $29,120
August:
Production level = 25,960 units
Variable Costs per unit = $2.80
Variable Costs = $2.80 * 25,960
Variable Costs = $72,688
Fixed Costs = $32,500
Mixed Costs = Total Costs - Variable Costs - Fixed Costs
Mixed Costs = $161,212 - $72,688 - $32,500
Mixed Costs = $56,024
Answer b.
Mixed Costs:
Variable Cost per unit = (Mixed Costs, August - Mixed Costs, February) / (Production level, August - Production level, February)
Variable Cost per unit = ($56,024 - $29,120) / (25,960 - 11,800)
Variable Cost per unit = $1.90
Fixed Costs = Mixed Costs, August - Variable Cost per unit * Production level, August
Fixed Costs = $56,024 - $1.90 * 25,960
Fixed Costs = $6,700
Cost Formula = $6,700 + $1.90 per unit
Answer c.
Variable Cost per unit = $2.80 + $1.90
Variable Cost per unit = $4.70
Fixed Costs = $32,500 + $6,700
Fixed Costs = $39,200
Total Cost for 16,949 units = $39,200 + $4.70 * 16,949
Total Cost for 16,949 units = $118,860
Answer d.
Cost behaviour pattern is linear. Relevant range does not change.
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