Question

True Flight Golf manufacturers a popular shaft for golf clubs. Its trade secret is a unique process for weaving high-tension wire into the center of the shaft such that energy is accumulated during the swing and released at impact. A specialized machine costing $4,500,000 is utilized in the manufacturing process. The machine has a 3-year life and no salvage value. True Flight uses straight-line depreciation. During the year, 30,000 shafts were produced, and the company was operating at full capacity. $900,000 of wire was used during the year. (a) Is machinery depreciation fixed or variable? Is wire fixed or variable? (b) For the two noted cost items, how much was total variable cost and total fixed cost? (c) For the two noted cost items, how much was variable cost per unit and how much was fixed cost per unit? (d) Repeat requirements (b) and (c), assuming production was only 18,000 units (and wire usage was reduced proportionately). (c) For the following year, if the company acquired an additional machine to enable production of 45,000 total units, what would happen to the expected total and per unit variable and fixed cost?

Answer 1

1.Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy.
2.Variable cost per unit will remain same while fixed cost per unit will change according to the level of production

-RANKA i a af cost of Machine = $415 million on No. of units produced = 30,000 i.e. full capacity of wire used $900,000 영 As Dequiciation is charged at SLM so the amount of depuiciation should be fixed for 3 years i.e. till the life cycle of machine E' depuiciatient scout of Masluine – Salvage value hours intot Net Life of Machine (years) 14+5 -0 =1.5milton Wire is directly related to number of shaft's atailor manufactured o it is vaniable b. Total vaniable cost $900,000 (as wo other data of materials used labor tes cost is given, we will tako neure cast as nailable cost) Total fisced cost incurred a $4.5 million Ans Ans. c.) variable cost / unit rutal variable cost No. of units produced = 900,000 30/unit 30,000 Ans.

-RANKA fixed cost unit Ans. fou 30,000 cost of Total fixed cost und No. of units produced 4.5 million = 150. 30,000 c) of production was only 18000 units then let us calculate cost of used nia unitary method units wire = $900,000 1 unit & 900 DDD X1 30,000 fou 18000 units cost of wire will be- 900 on a 18001 - = $540,000 30,000 in Total vaniable cost = $540,000 Fixed cost = $4.5 million on vaniable cost per unit will remain the same i. e. 30/amit Fixed cost / unit $415 million (18000 $250 mit 11

-RANKA CE مع softن۔ 2.25m 2.) As east of additional machine is not ginen we will take ad cast op additional puopoutionate machine to the data given - according Agaur by unitary method 30000 units a yean machine costs $4.5 million SOOD 14:5X4500D 30,000 Totat fixed to $6_75mlttien Now we calculate total variable cost fou 45000 units for 30,000 units wire cost $900,000 for 45000 L 900.000 X 45000 30,000 ². Total Vaulable cost = $1. 35 million : variable costunit= 1.35m/45000 te 30 unit (same) & fixed cost this year . vost of existing machines less Aeprication z 3 [4.5-115] cost of Neue Machine av Total Fixed cost $5.25m = 2.25 Nove fixed cost / unist = 5.25m / 45000 = $116.667 (apprese) 17,18 படிகள்