Question

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 = $603,000 + $1.35X, where X equals number of smokers. Last year, SmokeCity produced 22,500 smokers. Actual overhead costs for the year were as expected.

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) 21,900 units and (b) 23,800 units. Round your answers to the nearest cent.

	21,900 Units	23,800 Units
Unit cost	$	$
Unit fixed cost
Unit variable cost

Answer 1

2.

Total overhead cost = $ 603,000 + $ 1.35 X

                                    = $ 603,000 + ($ 1.35 x 22,500)

                                    = $ 603,000 + $ 30,375 = $ 633,375

3.

Total fixed overhead = Total overhead cost – variable overhead cost

                                     = $ 633,375 - $ 30,375 = $ 603,000

4.

Total variable overhead cost = Variable overhead cost per unit x no. of unit produced

                                                        = $ 1.35 x 22,500 = $ 30,375

5.

Overhead cost per unit produced = Total overhead cost/ no. of unit produced

                                                             = $ 633,375/22,500 = $ 28.15

6.

Fixed overhead cost per unit = Total fixed overhead cost/ no. of unit produced

                                                    = $ 603,000 /22,500 = $ 26.80

7.

Variable overhead cost per unit = Total variable overhead cost/ no. of unit produced

                                                    = $ 30,375 /22,500 = $ 1.35

8.

Overhead cost	per unit	21,900 Units	23,800 units
Unit cost	$            28.15	$               616,485	$           669,970
Unit Fixed cost	$              1.35	$                 29,565	$              32,130
Unit variable cost	$            26.80	$               586,920	$           637,840