Question

United Motors specializes in producing one specialty vehicle. It is called surfr and is styled to easily fit surfboards in its back area and top-mounted storage racks: United has the following manufacture costs:

Plant management​ costs, 1,464,000 per year

Cost of leasing equipment 2.328,000 per year

Workers wages $700 per suffer vehicle produced

Direct material costs, Steel $1,500 per Surfer; Tires $130 per tire, each surfer take 5 tires (one spare) City license, which is charged monthly based on the numbers of tires used in production

0-500 tires $20,000 501-1000 tires $60,000 more than $1000 tires $160,000
1. What is the variable manufacturing cost per​ vehicle? What is the fixed manufacturing cost per​ month? 2. Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your​ graphs? Explain. 3. What is the total manufacturing cost of each vehicle if 100 vehicles are produced each​ month? 225 vehicles? ​vehicles? How do you explain the difference in the manufacturing cost per​ unit?

Answer 1

1. Variable manufacturing cost per vehicle = $2,150.

Fixed overhead cost per annum = $3,792,000

Fixed cost per month = $31,600

Working:

Wages per vehicle		700
Direct material per vehicle
Steel	1500
tires( 5 x 130)	650	2150
Total variable manufacturing cost per vehicle		2150
Plant management costs	1464000
Cost leasing equipment	2328000
Total fixed manufacturing cost per annum	3792000

2.

3.

Cost for 100 vehicles per month
	Total	Per unit
Variable costs (2,150 x 100)	215000
Fixed costs	31600
Licence costs *	20000
Total Costs	266600	2666
500 tires @5 tyres per tyre.
Cost for 250 vehicles per month
	Total	Per unit
Variable costs (2,150 x 250)	537500
Fixed costs	31600
Licence costs *	160000
Total Costs	729100	2916.4
2,500 tires @5 tyres per tyre.
The cost per vehicle has gone up because of increase in the
licensing cost .