Question

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Required information E5-4 and E5-5 [LO 5-1, 5-5) Morning Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0-1.600 units, and monthly production costs for the production of 1,200 units follow. Morning Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costs Direct materials Direct labor Utilities ($130 fixed) Supervisor's salary Maintenance ($280 fixed) Depreciation Total Cost $ 2,500 6,500 640 3,200 530 800 nces E5-4 (Algo) Determining Cost Behavior and Calculating Expected Cost [LO 5-1) Required: 1. Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit (or combination thereof). 2. Determine the total fixed cost per month and the variable cost per unit for Morning Dove. 3. State Morning Dove's linear cost equation for a production level of 0-1.600 units. Enter answer as an equation in the form of y = a + bx. 4. Calculate Morning Dove's expected total cost if production increased to 1400 units per month. Enter answer as an equation in the form of y = a + bx. Complete this question by entering your answers in the tabs below. Required 2 Required 3 Required 4 Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit for com

Answer 1

1)			Behavior
	Direct Material		Variable	$      2.08	per unit		per month
	Direct Labor		Variable	$      5.42	per unit		per month
	Utilities		Mixed	$      0.43	per unit	$    130.00	per month
	Supervisor's Salary		Fixed		per unit	$ 3,200.00	per month
	Maintenance		Mixed	$      0.21	per unit	$    280.00	per month
	Depreciation		Fixed		per unit	$    800.00	per month
	To calculate variable cost per unit, simply divide the cost by 1200 units
	In case of mixed cost, first deduct the fixed cost from the variable cost then
	divide the variable cost by 1200 units
	E.g., for Utilities, variable cost per unit = ($ 640 - $ 130) / 1200

2)	Total variable cost per unit			$        8.13
	Total fixed cost per month			$ 4,410.00

3)

Total cost =

$ 4410 + $ 8.13x

4)	Total cost =		$ 4410 + $ 8.13 x 1400
		=	$ 15,792.00

Is this okay?