Madden Company would like to estimate costs associated with its production of fo
ID: 2817730 • Letter: M
Question
Madden Company would like to estimate costs associated with its production of football helmets on a monthly basis. The accounting records indicate the following production costs were incurred last month for 4,000 helmets.
Assembly workers’ labor (hourly)
$70,000
Factory rent
3,000
Plant manager’s salary
5,000
Supplies
20,000
Factory insurance
12,000
Materials required for production
20,000
Maintenance of production equipment (based on usage)
18,000
REQUIRED:
a. Identify which of the costs in the table above are fixed, and which are variable. (5.1)
b. Use account analysis to estimate total fixed costs per month and the variable cost per unit. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v. (5.2)
c. Estimate total production costs assuming 5,000 helmets will be produced and sold. (5.2)
d. Prepare a contribution margin income statement assuming 5,000 helmets will be produced, and each helmet will be sold for $70. Fixed selling and administrative costs total $10,000. Variable selling and administrative costs are $8 per unit. (5.3)
Assembly workers’ labor (hourly)
$70,000
Factory rent
3,000
Plant manager’s salary
5,000
Supplies
20,000
Factory insurance
12,000
Materials required for production
20,000
Maintenance of production equipment (based on usage)
18,000
Explanation / Answer
A
Variable cost
Assembly workers labor
70000
supplies
20000
material required for production
20000
maintenance of production equipment
18000
total variable cost
128000
Fixed cost
factory rent
3000
plant manager salary
5000
factory insurance
12000
total fixed cost
20000
variable cost per unit
128000/4000
32
total fixed cost
20000
B
Y= f + bx
20000+(4000*32)
148000
C
Y= f + bx
20000+(5000*32)
180000
D
sales
5000*70
350000
less variable cost
5000*32
160000
gross contribution margin
190000
less variable selling and adminitrative
40000
contribution margin
150000
less fixed cost
20000
less fixed selling and administrative expenses
10000
net income
120000
A
Variable cost
Assembly workers labor
70000
supplies
20000
material required for production
20000
maintenance of production equipment
18000
total variable cost
128000
Fixed cost
factory rent
3000
plant manager salary
5000
factory insurance
12000
total fixed cost
20000
variable cost per unit
128000/4000
32
total fixed cost
20000
B
Y= f + bx
20000+(4000*32)
148000
C
Y= f + bx
20000+(5000*32)
180000
D
sales
5000*70
350000
less variable cost
5000*32
160000
gross contribution margin
190000
less variable selling and adminitrative
40000
contribution margin
150000
less fixed cost
20000
less fixed selling and administrative expenses
10000
net income
120000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.