Question

E5-2 Determining Cost Behavior and Calculating Expected Cost [LO 5-1] 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 0–1,700 units, and monthly production costs for the production of 1,400 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 ($120 fixed) Supervisor's salary Maintenance ($330 fixed) Depreciation Total Cost $ 1,700 6,500 630 3,300 530 850 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). (Round your per unit value to 2 decimal places.) Production Costs Behavior Direct Materials per Month Rate per Unit per Unit per Unit Direct labor per Month Utilities per Month Supervisor's Salary per Unit per Month Maintenance per Unit per Month Depreciation per Unit per Month

Answer 1

Part-1:- Morning Dove Company
Production Cost	Behaviour		Rate
			Per Unit		Per Month
Direct Material (1700/1400)	Variable	$1.21	Per Unit		Per Month
Direct Labour (6500/1400)	Variable	$4.64	Per Unit		Per Month
Utilities (630-120)/1400	Mixed	$0.36	Per Unit	$120.00	Per Month
Supervisor's Salay	Fixed		Per Unit	$3,300.00	Per Month
Maintainance (530-330)/1400	Mixed	$0.14	Per Unit	$330.00	Per Month
Depreciation	Fixed		Per Unit	$850.00	Per Month

Part-2

Variable cost per Unit = Direct Material+ Direct Labour+ Utilities + Maintainance

$1.21+$4.64+$0.36+$0.14=$6.36

Fixed Cost per month= Utilities+ Supervisor Salary+Maintainance+ Depreciation

$120+3300+$330+$850= $4600

Part-3

Total Cost= Fixed Cost + Variable Cost

Where , Total Cost= Y

Fixed Cost = a

Variable cost per Unit= b

No. of Unit= X

Hence,

Y= a+bX

Y= $4600+6.36X

Part-4

Total Cost= Fixed Cost + Variable Cost

Where , Total Cost= Y

Fixed Cost = a

Variable cost per Unit= b

No. of Unit= X= 1600 Unit

Hence,

Y= a+bX

Y= $4600+(6.36*1600)

Y=$14776