Question

X Company wants to estimate total costs (overhead plus administrative) in March, when production is expected to be 1,400 units. It analyzed January costs to determine the parameters of the overhead and administrative cost functions. January production was 1,000 units and costs were as follows:

Total overhead costs	$56,000
Total fixed overhead costs	31,920
Total administrative costs	38,000
Total variable administrative costs	10,640

What is X Company's estimate of total costs in March [round unit costs to two decimal places]?

Answer 1

Answer Costs An organligtion iqumes so many cests dyulng the prodychens These costs may be ma94fycturing office ad qs ministrative on selling costs from such costs sömk ere vertable 1999 ture Y Lens some are fixed in nature Variable costs are the costs which are changes as per I I production activity changes. It is depentent on the level of I activity of producho fixed costs are the casts which are fixed in nature. There is no impact of them qI production increques or decreeper They are independent of production schuilty An Organighan will cregle of cost function for the activity. This cost fraction is y = a + bx. where y = total costs d = fixet calls 6 : variable cost per unit ; and x = level of polection activity In the question, we have given jagucquy level of produchon Lactivity as 1000 nits. It will helpful to find out the variable cost per unit We have not given total variable ove whead costs and totq) fixed administrative costs we find such figurer by deducting them from total costs of such activity : i. Total variable Overhead costs Tota) overhead - Total Fixel last .. overhead cost $ ( 56000 · 3)920) $ 24080, - -

Total variable Overhead Gost per 4914 = . Total varjalle overhead costs in Jan. Total Profichieg of unit in Jan. $ 24000 1000 units - $ 24.08 per you. Tutal fixed Almigijslu tive Overhead Cost - Total Administrative - To byl velable Adminpluggia Ge Gits : 5 $ (28000 - 10640) $ 27360 = Total variable Administrative Cost per unit Total variable Adm. Costs in Jan Total Polyclion of units in Sol Igna = $ 10640 1000 y nito = $10.64 per vnic Cost function is as follows for : Overhead costs - $ (31910 Administra hue Costs = $ (27360 + + 24.08 x level of activity) 10.64 x level of quively)

Calellabion of Estingtel total cost of X company in March at level of production dubulty = 1400 yalls = // Totyl oveshey's) +/Total Adminicharito I Gato osts - $ { [31920 + P 24.08 x 1400 496.) (27360 + ( 10.648 1490 4918)2 : $ (31920 + 38712) + ( 27260 +_14896)] $ 865632 2 + (42256) $ 107888__ X's commny estimate of ac&vity production is of total corte $ 107888. in march at level