Question

Part 4 Baxter Company has a relevant range of production between 15,000 and 30,000 units. The following cost data represents average variable costs per unit for 25,000 units of production. Average Cost per Unit $ 10 Direct materials .......... Direct labour.............. Indirect materials ............. Fixed manufacturing overhead ......... Variable manufacturing overhead. Fixed selling and administrative expenses.... Variable sales commissions. isesenesnis Nowo Requirements: Using the costs data from Baxter Company, answer the following questions: (a) If 15,000 units are produced, what is the variable cost per unit? (b) if 28,000 units are produced, what is the variable cost per unit? 2. (a) If 21,000 units are produced, what are the total variable costs? (b) If 29,000 units are produced, what are the total variable costs? 3. (a) If 17,000 units are produced, what are the total manufacturing overhead costs incurred? (b) If 23,000 units are produced, what are the total manufacturing overhead costs incurred? 4. (a) If 30,000 units are produced, what are the per unit manufacturing overhead costs incurred? (b) If 15,000 units are produced, what are the per unit manufacturing overhead costs incurred?

Answer 1

1)a) Variable cost per unit = 10 + 9 + 2 + 14 = $35. It is assumed that indirect materials are variable manufacturing overhead costs.  

1)b) Variable cost per unit remains the same irrespective of production. So variable cost per unit = $35

2)a) If 21000 units are produced, total variable costs = 35 * 21000 = $735000

2)b) If 29000 units are produced, total variable costs = 35 * 29000 = $1015000

3)a) If 17000 units are produced, total manufacturing overhead costs = 17000 * 3 + 6 * 25000 + 2 * 17000 = $235000

3)b) If 23000 units are produced, total manufacturing overhead costs = 23000 * 3 + 6 * 25000 + 2 * 23000 = $265000

4)a) If 30000 units are produced, per unit manufacturing overhead costs = 3 + 2 + 6 * 25000 / 30000 = $10 per unit

4)b) If 15000 units are produced, per unit manufacturing overhead costs = 3 + 2 + 6 * 25000 / 15000 = $15 per unit