Question

Cost Behavior

SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = $605,445 + $1.27X, where X equals number of smokers. Last year, SmokeCity produced 22,300 smokers. Actual overhead costs for the year were as expected.

Required:

1. What is the driver for the overhead activity?
Number of smokers

For questions 2-4, Enter the final answers rounded to the nearest dollar.

2. What is the total overhead cost incurred by SmokeCity last year?

$

3. What is the total fixed overhead cost incurred by SmokeCity last year?

$

4. What is the total variable overhead cost incurred by SmokeCity last year?

$

For questions 5-7, round your answers to the nearest cent. Use those rounded figures in subsequent computations, if necessary.

5. What is the overhead cost per unit produced?

$ per unit

6. What is the fixed overhead cost per unit?

$ per unit

7. What is the variable overhead cost per unit?

$ per unit

8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 22,000 units and (b) 24,300 units. Round your answers to the nearest cent.

	22,000 Units	24,300 Units
Unit cost	$	$
Unit fixed cost
Unit variable cost

The reason the unit costs changed in the way they did is because:

the fixed costs are being spread over the different levels of production.

Answer 1

2)	Total overhead cost =		$ 605445 + ($ 1.27 x 22300 units)
		=	$ 633,766.00
3)	Total fixed OH cost =		$ 605,445.00
4)	Total variable cost =		$   28,321.00	($ 633766 - $ 605445)
5)	Overhead cost per unit =		$ 633766 / 22300
		=	$           28.42
6)	Fixed oh cost per unit =		$ 605440 / 22300
		=	$           27.15
7)	Variable cost per unit =		$             1.27

			22000 units		24300 units
8)	Unit cost		$       28.79		$       26.19
	Unit fixed cost		$       27.52	($ 605445 / 22000)	$       24.92	($ 605445 / 24300)
	Unit variable cost		$         1.27		$         1.27