Question

1. Relevant Range and Fixed and Variable Costs

   Child Play Inc. manufactures electronic toys within a relevant range of 20,000 to 150,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:

   Complete the cost schedule. When computing the cost per unit, round to two decimal places.

   Toys produced	40,000		80,000		120,000
   Total costs:
   Total variable costs	$720,000		d. $		j. $
   Total fixed costs	600,000		e.		k.
   Total costs	$1,320,000		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

Ans.1	Toys produced	40,000	80,000	120,000
	Total costs:
	Total variable costs	$720,000	$1,440,000	$2,160,000
	Total fixed costs	$600,000	$600,000	$600,000
	Total costs	$1,320,000	$2,040,000	$2,760,000
	Cost per unit:
	Variable cost per unit	$18.00	$18.00	$18.00
	Fixed cost per unit	$15.00	$7.50	$5.00
	Total cost per unit	$33.00	$25.50	$23.00
	*Total fixed cost and Variable cost per unit remain constant on each level of activity.
	*Variable cost per unit on the level of 40,000 toys produced:
	Variable cost per unit   Total variable cost / Toys produced
	$720,000 / 40,000 = $18 per unit
	*Total variable cost on the level of 80,000 and 120,000 toys produced:
	Total variable cost =   Variable cost per unit * Toys produced
	Toys produced	80,000	120,000
	Total variable costs	$18 * 80,000	$18 * 120,000
	*Fixed cost per unit = Total fixed cost / No. of canoes produced and sold.
	Toys produced	40,000	80,000	120,000
	Fixed cost	$600,000 / 40,000	$600,000 / 80,000	$600,000 / 120,000