Inc. manufactured 15,000 units of product last month and identified the followin
ID: 2335010 • Letter: I
Question
Inc. manufactured 15,000 units of product last month and identified the following costs associated with the manufacturing activity: Variable costs: Direct materials used Direct labor Indirect materials and supplies Power to run plant equipment $ 1,015,000 2,020,000 234,000 213,000 Fixed costs: Supervisory salaries Plant utilities (other than power to run plant equipment) Depreciation on plant and equipment (straight-line, time basis) Property taxes on building 908,000 290,000 142,000 198,000 Required: Unit variable costs and total fixed costs are expected to remain unchanged next month. Calculate the unit cost and the total cost if 21,000 units are produced next month. (Round "Unit costs" to 2 decimal places.) Answer is complete but not entirely correct. Total variable 4874,940 costs Total foxed costs Total costs Unit costs $1,538,000 6,412,940 305.38Explanation / Answer
Solution:
Total variable costs last month = 1,015,000 + 2,020,000 + 234,000 +213,000 = $3,482,000
Units manufactured last month = 15,000 units
Unit variable cost = $3,482,000 / 15000 = $232.13
Therefore,
Total variable costs next month = unit variable cost * units produced next month = $232.13* 21,000 = $4,874,730.
Total Fixed Cost = 908,000 + 290,000 + 142,000 + 198,000 = $1,538,000
Total Costs = Variable costs + fixed costs = $4,874,730 + $1,538,000 = $6,412,730
Unit costs = Total costs / Units produced next month = $6,412,730 /21000 = $305.37