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Exercise 5-6 Pharoah Corporation manufactures a single product
Exercise 5-6
Pharoah Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,500 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $316 and $211, respectively.
|
Production in Units |
3,500 |
|
|
Production Costs |
||
| Direct materials | $7,912 | |
| Direct labor | 20,941 | |
| Utilities | 2,591 | |
| Property taxes | 1,055 | |
| Indirect labor | 4,747 | |
| Supervisory salaries | 2,004 | |
| Maintenance | 1,436 | |
| Depreciation | 2,532 |
Identify the above costs as variable, fixed, or mixed.
Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance. Exclude mixed costs in the calculation for variable cost per unit. (Round answers to 2 decimal places e.g. 2.25.)
Calculate the expected costs when production is 5,275 units.
Expert Solution
Identify the above costs as variable, fixed, or mixed.
|
Costs |
||
| Direct materials |
|
|
| Direct labor |
|
|
| Utilities |
|
|
| Property taxes |
|
|
| Indirect labor |
|
|
| Supervisory salaries |
|
|
| Maintenance |
|
|
| Depreciation |
|
Part B
| Fixed costs | = | $1,055 + $2,004 + $2,532 + $316 + $211 |
| = | $6,118 | |
| Variable costs to produce 3,500 units | = | $7,912 + $20,941 + $4,747 |
| = | $33,600 | |
| Variable cost per unit | = | $33,600/3,500 units |
| = | $9.60 per unit | |
| Variable cost portion of mixed cost | = | Total cost – Fixed portion |
| Utilities: | ||
| Variable cost to produce 3,500 units | = | $2,591 – $316 |
| = | $2,275 | |
| Variable cost per unit | = | $2,275/3,500 units |
| = | $0.65 per unit | |
| Maintenance: | ||
| Variable cost to produce 3,500 units | = | $1,436 – $211 |
| = | $1,225 | |
| Variable cost per unit | = | $1,225/3,500 units |
| = | $0.35 per unit |
Part C
| Cost to produce 5,275 units | = | (Variable costs per unit × 5,275 units) + Fixed cost |
| = | (($9.60 + $0.65 + $0.35) × 5,275) + $6,118 | |
| = | $55,915 + $6,118 | |
| = | $62,033 |
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