Question

Rose Company has a relevant range of production between 10,000 and 25,000 units. The following cost data represents average cost per unit for 14,000 units of production. Average Cost per Unit Direct Materials Direct Labor Indirect Materials Fixed manufacturing overhead Variable manufacturing overhead Fixed selling and administrative expenses Variable sales commissions Using the cost data from Rose Company, answer the following questions: A. If 10,000 units are produced, what is the variable cost per unit? Variable cost per unit $ 52 X B. If 18,000 units are produced, what is the variable cost per unit? Variable cost per units 52 X C. If 22,000 units are produced, what are the total variable costs? Total variable costs $ 1,092,00 X D. If 12,000 units are produced, what are the total variable costs? Total variable costs $ 572,000 X

Answer 1

First of all, we should understand some basic concepts of Fixed and variable cost.

Variable cost is associated with the number of goods the company produces. It increases or decreases with the company's volume of production.

Fixed Cost does not vary with the company's volume of production. It is the other cost incurred by businesses.

NOTE:- Variable cost per unit remains constant irrespective of increase or decrease in volume of production, whereas the fixed cost per unit decreases/increases when volume of production increases/decreases.

Answer:-

A)

PARICULARS	$ per unit
Direct Material	13
Add:-Direct Labor	10
Add:-Variable manufacturing OH	2
Add:- Variable sales commision	25
Variable cost per unit	50

B) Since variable cost per unit remains constant irrespective of volume of production (see NOTE) hence it will remain the same as $50.

C) If 22000 units produced the total variable cost will be

22000 units * $50 per unit = $1100000

D)If 12000 units are produced the total variable cost will be

12000 units * $50 per unit = $600000

E) if 19000 units are produced the Manufacturing OH cost will be

Particulars	Calculations	$
Variable Manufacturing OH	19000*$2 per unit	$38000
Fixed manufacturing OH	14000 units * $4 p.u.	$56000

Hence total manufacturing OH cost will be $94000.

Since total fixed cost remains constant irrespective of volume of production.

F) if 24000 units are produced the Manufacturing OH cost will be

Particulars	Calculations	$
Variable Manufacturing OH	24000*$2 per unit	$48000
Fixed manufacturing OH	14000 units * $4 p.u.	$56000

Hence total manufacturing OH cost will be $104000