Question

In: Accounting

Determine the estimated total cost and cost per unit of each product

Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $15,680. The booth will be open 32 hours during the trade show. Ms. Ortega also plans to add a new product line, ProOffice, which will cost $188 per package. She will continue to sell the existing product, EZRecords, which costs $108 per package. Ms. Ortega believes that the salesperson will spend approximately 22 hours selling EZRecords and 10 hours marketing ProOffice.

Required

Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 88 units of EZRecords and 43 units of ProOffice.
Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 204 units of EZRecords and 99 units of ProOffice.

Expert Solution

a. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 88 units of EZRecords and 43 units of ProOffice.

Total Cost = Fixed Cost + Variable Cost

Fixed Cost = $15,680

Variable Cost = cost of making a unit of output × number of units produced.

Variable Cost of EzRecords products = 108*88= $9,504

Variable Cost of proOffice products = 188*43= $8,084

Fixed Cost for EzRecords = (22/32)*15680= $10780

Fixed Cost for ProOffice = (10/32)*15680= $4900

Total cost for EzRecords = 10780+9504= 20,284

Total Cost for ProOffice = 4900+8084= 12,984

Cost per unit for EzRecords = (total cost of production)/(total units produced)

20,284/ 88= 230.50

Cost per unit of ProOffice =

12,984/43= 301.95

b. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 204 units of EZRecords and 99 units of ProOffice.

Total Cost = Fixed Cost + Variable Cost

Fixed Cost = $15,680

Variable Cost = cost of making a unit of output × number of units produced.

Variable Cost of EzRecords products = 108*204= $22,032

Variable Cost of proOffice products = 188*99= $18,612

Fixed Cost for EzRecords = (22/32)*15680= $10780

Fixed Cost for ProOffice = (10/32)*15680= $4900

Total cost for EzRecords = 10780+22032= 32,812

Total Cost for ProOffice = 4900+18612= 23,512

Cost per unit for EzRecords = (total cost of production)/(total units produced)

32812/ 204= 160.84

Cost per unit of ProOffice =

23512/99= 237.49

Here are the correct answers

Christopher Mann answered 3 years ago

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