Question

Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $15,300 on its plant equipment. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 12,000 ounces of materials to manufacture 4,800 flash drives per month. Each ounce of material costs $3.00. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $28,800 of variable manufacturing overhead resources to produce 4,800 flash drives per month.

In your calculations, round variable rate per flash drive to the nearest cent. If required, round final answers to the nearest cent.

Required:

1. Create a formula for the monthly cost of flash drives for Big Thumbs.

Total cost of flash drives =

+ (

x Number of flash drives)

Total cost of flash drives = $
+ ($
x Number of flash drives)

2. If the department expects to manufacture 6,000 flash drives next month, what is the expected fixed cost (assume that 6,000 units is within the company's current relevant range)?
$

What is the total variable cost (assume that 6,000 units is within the company's current relevant range)?
$

What is the total manufacturing cost (i.e., both fixed and variable) (assume that 6,000 units is within the company's current relevant range)?

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

answer 3 Part 1) 4 Fixed for amnufacturing flash drive = Depreciation cost 5 = $ 15300 6 7 Variable Cost Per Unit 8 = cost of material + cost of manufacturing overheads 9 = ( 12000*3/4800)+(28800/4800) 10 = 7.5 +6 11 = $ 13.5 12 13 Total Cost of Flash Drive = Fixed Cost +(variable cost * number of flash drives) 14 15 Total cost of flash drives = $15300 + ($13.5*Number of flash drives) 16

A B E - Part 2) Fixed cost will remain same that is $ 15300 Thus the correct answer is $ 15300 2 Variable cost B = no. of units * variable cost per unit 4 = 6000 * 13.5 = $ 81000 5 - Thus the correct answer is $ 81000 Total manufacturing cost = fixed cost + variable cost = 15300 + 81000 = $96300 2 5 Thus the toal manufacturing cost = $ 96300