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Fortress Inc
Fortress Inc. manufactures pistons for custom motorcycles within a relevant range of 300,000 to 375,000 pistons per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:
| Number of Pistons per year | Number of Pistons per year | Number of Pistons per year | |
|---|---|---|---|
| Components produced: | 300,000 | 360,000 | 375,000 |
| Total costs: | |||
| Total variable costs | $75,000 | (d) | (j) |
| Total fixed costs | 90,000 | (e) | (k) |
| Total costs | $165,000 | (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) |
Complete the preceding cost schedule, identifying each cost by the appropriate letter (a) through (o).
Expert Solution
Completed cost schedule after computation of all missing elements:
| Number of Pistons per year | Number of Pistons per year | Number of Pistons per year | |
|---|---|---|---|
| Components produced: | 300000 | 360000 | 375000 |
| Total costs: (in $) | |||
| Total variable costs | $75,000.00 | (d) 90000 | (j) 93750 |
| Total fixed costs | $90,000.00 | (e) 90000 | (k) 90000 |
| Total costs | $165,000.00 | (f) 180000 | (l) 183750 |
| Cost per unit: | |||
| Variable cost per unit | (a) 0.25 | (g) 0.25 | (m) 0.25 |
| Fixed cost per unit | (b) 0.30 | (h) 0.25 | (n) 0.24 |
| Total cost per unit | (c) 0.55 | (i) 0.50 | (o) 0.49 |
Working notes:
(a) Variable cost per unit = total variable cost / number of components
= 75000 / 300000 = $0.25 per unit
(b) Fixed cost per unit = total fixed cost / number of components
=90000 / 300000 = $0.30 per unit
(c) = (a) + (b)
(d) & (j): Total variable costs = number of components produced & variable cost per unit
(e) & (k): Total fixed costs = $90000, remains constant
(f) & (I): Total costs = sum of total variable costs and total fixed costs
(g) & (m): Variable cost per unit = $0.25, remains constant per unit.
(h) & (n): Fixed cost per unit = Total fixed costs / number of components produced
(i) & (o): Total cost per unit = variable cost per unit + fixed cost per unit
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