Question

In: Accounting

Cover-to-Cover Company is a manufacturer of shelving for books. The company has compiled the following cost...

Cover-to-Cover Company is a manufacturer of shelving for books. The company has compiled the following cost data, and wants your help in determining the cost behavior. After reviewing the data, complete requirements (1) and (2) that follow.

Units

Total

Total

Total Machine

Produced

Lumber Cost

Utilities Cost

Depreciation Cost

12,000 shelves $144,000 $14,800 $140,000
24,000 shelves $288,000 $28,600 $140,000
48,000 shelves $576,000 $56,200 $140,000
60,000 shelves $720,000 $70,000 $140,000

1. Determine whether the costs in the table are variable, fixed, mixed, or none of these.

Variable Cost

Fixed Cost

Mixed Cost

None of these

Lumber
Utilities
Depreciation

Points:

3 / 3

2. For each cost, determine the fixed portion of the cost, and the per-unit variable cost. If there is no amount or an amount is zero, enter "0". Recall that, for N = Number of Units Produced, Total Costs = (Variable Cost per Unit x N) + Fixed Cost. Complete the following table with your answers.

Cost Fixed Portion of Cost Variable Portion of Cost (per Unit)
Lumber 0 12.00
Utilities 1000 1.15
Depreciation 140000 0.00

Use the Dynamic Exhibit to answer the following questions.

1. When the number of units produced is 5,000, the total direct materials cost is $ and the cost per unit is $.

2. When the number of units produced is 15,000, the total direct materials cost is $ and the cost per unit is $.

3. When the number of units produced is 25,000, the total direct materials cost is $ and the cost per unit is $.

4. When the number of units produced is 30,000, the total direct materials cost is $ and the cost per unit is $.

Use the Dynamic Exhibit to answer the following questions. Round your answers to two decimal places, if necessary.

1. When the number of units produced is 50,000, the total fixed cost is $ and the cost per unit is $.

2. When the number of units produced is 100,000, the total fixed cost is $ and the cost per unit is $.

3. When the number of units produced is 150,000, the total fixed cost is $ and the cost per unit is $.

4. When the number of units produced is 300,000, the total fixed cost is $ and the cost per unit is $.

Solutions

Expert Solution

Variable overheads comprises of expenses which vary in proportion to the change of volume of production and shall be absorbed to products or services based on actual capacity utilisation.

Fixed overheads comprises of expenses whose value does not change with the change in volume of production and shall be absorbed based on the normal capacity.

Semi-variable overheads are partly affected by change in the production volume. They are further segregated into variable overheads & fixed overheads.

1. Lumber cost- Cost varies with the unit of production.

Utilities - It partly affected with the unit of production.

Depreciation - It does not affect with the unit of production.

variable cost fixed cost mixed cost none of these
Lumber yes
Utilities yes
Depreciation yes

2. Determination of the fixed portion of cost and variable portion of cost -

Lumber variable cost per unit = Total Lumber cost / shelves produced

= 144000/12000

= 12 ( variable cost per unit does not change with production).

Utilities Cost -

variable cost per unit = Difference in cost / Difference in unit produced

= (28600*14800)/(24000-12000)

= 13800/12000

= 1.15

Fixed portion of utilities = 14800 - 1.15*12000

= 14800 - 13800

= 1000

Depreciation cost does not change with unit of production hence it is fixed cost.

3. Determination of direct material cost -

a b (a*b)
Unit Produced (Shelves) variable cost per unit lumber/material Total Lumber/Direct material cost
5000 12 60000
15000 12 180000
25000 12 300000
30000 12 360000

4. Determination of total fixed cost & fixed cost per unit in every give case -

a b (a/b)
Unit Produced (Shelves) Total Fixed cost (Fixed cost of utilities+Depreciation) Total Lumber/Direct material cost
50000 141000 2.82
100000 141000 1.41
150000 141000 0.94
300000 141000 0.47

Please check with your answer and let me know.


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