Question

Cost Behavior SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = $560,320 + $1.22X, where X equals number of smokers. Last year, SmokeCity produced 20,600 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? For questions 2-4, Enter the final answers rounded to the nearest dollar. 2. What is the total overhead cost incurred by Smoke City last year? 3. What is the total fixed overhead cost incurred by Smoke City last year? 4. What is the total variable overhead cost incurred by Smoke City last year? For questions 5-7, round your answers to the nearest cent. Use those rounded figures in subsequent computations, if necessary. 5. What is the overhead cost per unit produced? per unit 6. What is the fixed overhead cost per unit? per unit 7. What is the variable overhead cost per unit? per unit 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 20,200 units and (b) 22,300 units. Round your answers to the nearest cent. 20,200 Units 22,300 Units Unit cost Unit fixed cost Unit variable cost The reason the unit costs changed in the way they did is because: the relevant range has increased the total fixed costs are increasing the fixed costs are being spread over the different levels of production. the unit variable cost is dropping as production rises

Answer 1

1	The driver for overhead activity is no. of smokers produced.
2	Total Overhead cost last year =$560,320 + $1.22*20,600
	Total Overhead cost last year =$560,320 + $25,132 =$585,452
3	Total Fixed Overhead cost last year =$560,320
4	Total Variable Overhead cost last year =$1.22*20,600 =$25,132
5	Total Overhead cost last year =$585,452
	Overhead cost per unit for last year =$585,452/20,600 =$28.42 per unit
6	Total Fixed Overhead cost last year =$560,320
	Total Fixed Overhead cost per unit =$560,320/20,600 =$27.20 per unit
7	Total Variable Overhead cost last year =$1.22*20,600 =$25,132
	Total variable Overhead cost per unit =$25,132/20,600 =$1.22 per unit
8		20200 units	22300 units
	Unit Costs	$                                           28.96	$                                  26.35
	Unit Fixed Costs	$                                           27.74	$                                  25.13
	Unit Variable Costs	$                                             1.22	$                                    1.22
	The reason for change is that the fixed costs are being spread over different levels of production