Question

Required information [The following information applies to the questions displayed below.) 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 0-1,500 units, and monthly production costs for the production of 500 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 ($100 fixed) Supervisor's salary Maintenance ($280 fixed) Depreciation Total Cost $1,500 7,500 650 3,000 480 800 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 0–1,500 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 1,200 units per month. Enter answer as an equation in the form of y= a + bx.

Answer 1

Solution:

Req. 1

Rate Production costs Direct materials Direct labor Utilities Behavior Vairable Vairable $ 3.00 Per Unit $15.00 Per Unit $ 1.10 Per Unit N/A Per Month N/A Per Month 100 Per Month Mixed $ Supervisor's salary Fixed N/A Per Unit $ 3,000 Per Month Maintenance Mixed $ 0.40 Per Unit $ 280 Per Month Depreciation Fixed N/A Per Unit $ 800 Per Month

Req. 2. Total variable cost per unit = $3.00 + $15.00 + $1.10 + $0.40 = $19.50

Total fixed cost per month = $100 + 3,000 + 280 + 800 = $4,180

Required 3.

Total cost = 4,180 + $19.50 X

Required 4.

+ X = a 4,180 b 19.5 X 1200 $ 27,580