Question

Evening Dove Company manufactures one model of birdbath, which is very popular. Evening Dove sells all units it produces each month. The relevant range is 0-1,800 units, and monthly production costs for the production of 1,400 units follow. Evening Dove's utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costa Total Cost Direct materials $ 2,500 Direct labor 7,300 Utilities ($120 600 fixed) Supervisor's salary 2,600 Maintenance ($270 490 fixed) Depreciation 900 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). Behaviors Rate Rate Per unit Per month Production Costs Direct Materials Direct Labor Utilities Supervisor's Salary Maintenence Depreciation Per unit Per unit Per unit Per month Per month Per month Per unit Per unit Per Month Per month 2. Determine the total fixed cost per month and the variable cost per unit for Evening Dove. 3. State Evening Dove's linear cost equation for a production level of 0-1,800 units. Enter answer as an equation in the form of y = a + bx. 4. Calculate Evening Dove's expected total cost if production increased to 1,600 units per month. Enter answer as an equation in the form of y=a + bx.

Answer 1

Solution The Data Given in the Question is Pertaining to 1400 units The same is being apportioned on per unit and per month basis as applicable as required in Question 1 Production Costs Behaviors Direct materials Direct Direct Labour Direct Utilities Mixed Supervisor's Salary Fixed Maintenanace Mixed Depriciation Fixed Ref Note-1 Note-2 Note-3 Note-4 Note-5 Note-6 Rate $ $ $ NA $ NA 1.79 Per Unit 5.21 Per Unit 0.34 Per Unit Per Unit 0.16 Per Unit Per Unit Rate NA NA $ $ $ $ Per Month Per Month 120.00 Per Month 2,600.00 Per Month 270.00 Per Month 900.00 Per Month Direct materials Direct Cost Because the same depends upon the level of production. Direct Labour Direct Cost Because the same depends upon the level of production Utilities As given in Question The same was Classified as Mixed Supervisor's Salary Fixed, Because we have to pay supervisors salary irrespective of the level of production Maintenanace As given in Question The same was classified as Mixed Depriciation Fixed as the same was calculated depending upon the life of asset and not on production level Given costs for 1400 units are as follows Note-1: (Direct Materials - Variable) Note-2: (Direct Labour - Variable) Direct materials $ 2,500.00 Direct labour $ 7,300.00 Cost Per Unit 2500 1400 $ $ 1.79 Cost Per Unit 7300 1400 ' $ 5.21

Note-3: Utilities (Mixed) Note-4 (Supervisors Salary - Fixed) Utilities $ 600.00 Salary $ 2,600.00 Fixed Variable $ 120.00 480.00 (Total - Variable) Cost Per Unit 480 1400 $ $ 0.34 Note-5: Maintenance (Mixed) Note-6 (Depriciation - Fixed) Maintenance $ 490.00 Depriciation $ 900.00 Fixed Variable 270.00 220.00 (Total - Variable) Cost Per Unit 220 $ 0.16 1400 Determination of Total Fixed Cost Per Month and Total Variable cost per unit Total Fixed Cost per Month Total Variable Cost per Unit Utilities $ 120.00 Maintenance 270.00 Supervisor's Salary $ 2,600.00 Depriciation 900.00 Total Fixed Cost 3,890.00 Per Month Direct Materials Direct Labour Utilities Maintenance Total Variable Cost 1.79 5.21 0.34 0.16 7.50 Per Unit

Linear cost equation for purpose of production level of (0-1800) linear Cost Equation ya + bx Where as Total cost of Production Total Fixed Cost Variable Cost per unit level of Production Linear Equation for Production of (0-1800 units - a+bx y= $3,890 +7.50 x (x=0-1800) Total cost of producing 1600 units linear Cost Equation y Where as a + bx Total Cost of Production Total Fixed Cost Variable Cost per unit level of Production y a+bx y= $3,890 +7.50 x (x= 1600) y- $3,890 +7.50 (1600) $ 15,890.00