Question

Dotball Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 4,800 per month. The machine costs 58.000 and is depreciated using straight line depreciation over 10 years assuming zero residual value. Rent for the factory space and warehouse and other fixed manufacturing overhead costs total $1,500 per month. Dotball currently makes and sells 3,000 jaw-breakers per month. Dotball buys just enough materials each month to make the jaw-breakers it needs to sell. Materials cost 40 cents per jaw-breaker. Next year Dotball expects demand to increase by 100%. At this volume of materials purchased, it will get a 10% discount on price. Rent and other fixed manufacturing overhead costs will remain the same. Read the requirements. Requirement 1. What is Dotball's current annual relevant range of output? Dotball's current annual relevant range of output is 0 to 57,600 jaw-breakers. Requirement 2. What is Dotball's current annual fixed manufacturing cost within the relevant range? What is the annual variable manufacturing cost? Dotball's current annual fixed manufacturing costs = Requirements 1. What is Dotball's current annual relevant range of output? 2. What is Dotball's current annual fixed manufacturing cost within the relevant range? What is the annual variable manufacturing cost? 3. What will Dotball's relevant range of output be next year? How if at all, will total annual fixed and variable manufacturing costs change next year? Assume that if it needs to Dotball could buy an identical machine at the same cost as the one it already has. Print Done Enter any number in the edit fields and then click Check Answer. 2

Answer 1

Answer Pagens D the pooduction capacity iş 4800 jawbreakers Permont the Coorene ammual srelevant range of output iş 10 to 57600) Jawbreakers (4800 nos y 12 Month Current Annual fixed Manufacturing Coştę ? Rent-factory space & ware hoole Pother manufacturing overhood $ 18000 $ 1500x12 Dep on Machine 8000 $800 Total fixed Manufacturing $ 18,800 Annual variable Hanufactwing Costest Material Coşt (3000x12X0.40) = $14.400 Total Annual variable Manufacturing Costs $ 14,400 To Yearl - Costs -

3) Per month. Pageno If demand changes from 3000 to 6000 jawbouake 3000 x12 - 36000 to Gooox12 = 72006 jawbreakers peoryear. DotballCandie will need a second Machine - Assuming Dotball land Candies buyla Second machine identical to the first machine it will increase Capacity from 4800 jaw breakers per month to 9600 =) the annual relevant range will be between 4800x12= 57,600 and 9600x 12 3115200 jaw birea nel kert Aşşume the second machine Cost- Cost of madu $8000 Annual fined Manufacturing costs for and years Rent factory space & warehouse Rothe or Manufacturing overhead = $18,000 Dept on Machine ( Son ouveagx ) = $ 1600 = isoo x 12

I Pageno Total fixed Manufactuwing CafeS = $18.000+ $1600 -$19600 Annual variable manufacturing Costs for Second year ar - Material Costa 600 x 128 $25,920 0.40 X 90% Total Annual variable Manufacturing $25,920 Coşta