Question

Relevant Range and Fixed and Variable Costs

Child Play Inc. manufactures electronic toys within a relevant range of 72,000 to 114,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:

Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar.

Toys produced	72,000	91,200	114,000
Total costs:
Total variable costs	$24,480	d. $	j. $
Total fixed costs	27,360	e.	k.
Total costs	$51,840	f. $	l. $
Cost per unit:
Variable cost per unit	a. $	g. $	m. $
Fixed cost per unit	b.	h.	n.
Total cost per unit	c. $	i. $	o. $

Answer 1

Toys Produced [units]	72000	91200	114000
Total costs:
Total variable costs	$          24,480	$           31,008	$             38,760
Total fixed costs	$          27,360	$           27,360	$             27,360
Total costs	$          51,840	$           58,368	$             66,120
Cost per unit:
Variable cost per unit	$               0.34	$               0.34	$                 0.34
Fixed cost per unit	$               0.38	$               0.30	$                 0.24
Total Cost per unit	$               0.72	$               0.64	$                 0.58

Calculation:

Toys Produced [units]	72000	91200	114000
Total costs:
Total variable costs	$          24,480	91200*0.34	0.34*114000
Total fixed costs	$          27,360	$           27,360	$             27,360
Total costs	$          51,840	31008+27360	38760+27360
Cost per unit:
Variable cost per unit	24480/72000	$               0.34	$                 0.34
Fixed cost per unit	27360/72000	27360/91200	27360/114000
Total Cost per unit	0.34+0.38	0.34+0.30	0.34+0.24

Note:

1. Variable cost per unit does not change with change in units produced but fixed cost per unit changes with change in unit produced

2. Total variable cost changes with change in units produced and total fixed cost does not change with change in unit produced