Question

X Company's accountant developed a cost fuction to predict monthly overhead costs, with units produced as the single independent variable. She analyzed the following total overhead costs in March to develop the parameters of the cost function:

Supplies $29,100 Utilities 18,900 Maintenance 19,200 Insurance 10,700

The accountant classified these costs as follows: supplies were all variable; insurance was all fixed; variable utility costs were $15,120; fixed maintenance costs were $3,840.

March production was 900 units; June production is expected to be 1,100 units.

What is the accountant's estimate of variable overhead costs per unit in June [round variable costs per unit to two decimal places]?

Answer 1

Estimated variable cost per unit in June
	March			June
	900 Units			1100 Units
	Total	Variable	Fixed	Total	Variable	Fixed
Supplies	29,100	29,100		35,567	35,567*
Utilities	18,900	15,120	3,780	22,260	18,480**	3,780
Maintenance	19,200	15,360	3,840	22,613	18,773***	3,840
Insurance	10,700		10,700	10,700		10,700
Total	77,900	59,580	18,320	91,140	72,820	18,320
Cost Per unit		66.20			66.20
		(59580/900)			(72820/1100)

* 29100/900X1100

**15120/900X1100

*** 15360/900 X1100