Question

Mimi's Fixtures manufactures kitchen tiles in one plant, which has a practical capacity of 33,000 tiles. The variable cost of the tile is $6 per unit, and the fixed costs of the plant are $264,000 annually. Current annual demand is 22,000 tiles. Mimi bought the current plant because she expected that demand for the tiles would grow once her reputation was established. Required: a. What cost per tile should the cost system report? b. What is the cost of excess capacity? c. How would your answers to requirements (a) and (b) change if the smallest tile manufacturing plant that one could build (owing to technology) was able to produce 33,000 tiles? Complete this question by entering your answers in the tabs below. Required A Required B Required C What cost per tile should the cost system report? Cost per tile RequiredA Required B

Answer 1

solution 264000 22000 fixed cost of the plant Current production fixed cost per title variable cost per title Total cost of the title per unit 264000 33000 cost of Excess capacity: fixed cost of the plant capacity of the plant fixed cost per unit at capacity fixed cost current capacity Cost of excess capacity per unit 00 : 12 f

Revised cost if production is at 33000, 264000 33000 fixed cost of the plant current production fixed cost per tile variable cost per tille Total cost of the title per unit 264000 33000 Cost of Excess capacity : fixed cost of the plant Capacity of the plant fixed cost per unit at capacity fixed cost it corrent capacity cost of excess capacity per unit go do o