Morning Dove Company manufactures one model of birdbath, which is very popular.
ID: 2534281 • Letter: M
Question
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 0–1,500 units, and monthly production costs for the production of 1,200 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costs Total Cost Direct materials $ 1,900 Direct labor 7,500 Utilities ($140 fixed) 570 Supervisor’s salary 2,800 Maintenance ($310 fixed) 460 Depreciation 800
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.)
2. Determine the total fixed cost per month and the variable cost per unit for Morning Dove. (Round your variable cost per unit to 2 decimal places.)
3. State Morning Dove’s linear cost equation for a production level of 0–1,500 units. Enter answer as an equation in the form of y = a + bx. (Round your variable cost per unit to 2 decimal places.)
4. Calculate Morning Dove’s expected total cost if production increased to 1,400 units per month. Enter answer as an equation in the form of y = a + bx. (Round Variable cost per unit to 2 decimal places.)
Explanation / Answer
Answer
1.
Production Costs
Behavior
Total Cost
Rate
Direct Material
Variable
1900
1.583
Per Unit
Per Month
Direct Labor
Variable
7500
6.250
Per Unit
Per Month
Utilities
Mixed
570
0.358
Per Unit
140
Per Month
Supervisor's Salary
Fixed
2800
Per Unit
2800
Per Month
Maintenance
Mixed
460
0.125
Per Unit
310
Per Month
Depreciation
Fixed
800
Per Unit
800
Per Month
Total
8.317
Per Unit
4050
Per Month
2.
Total Variable Cost per Unit = $8.317 per unit
Total Fixed Cost per month = $4,050 per month
3.
Y = $4,050 + $8.317x
Y = Total Cost
X = No. of Units
4.
Total cost for 1,400 Units
= $4,050 + $8.317 * 1,400 Units
Total cost for 1,400 Units = $15,693.8
Production Costs
Behavior
Total Cost
Rate
Direct Material
Variable
1900
1.583
Per Unit
Per Month
Direct Labor
Variable
7500
6.250
Per Unit
Per Month
Utilities
Mixed
570
0.358
Per Unit
140
Per Month
Supervisor's Salary
Fixed
2800
Per Unit
2800
Per Month
Maintenance
Mixed
460
0.125
Per Unit
310
Per Month
Depreciation
Fixed
800
Per Unit
800
Per Month
Total
8.317
Per Unit
4050
Per Month
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