Asked by Abigail Stewart on May 14, 2024
Verified
Sandburg Manufacturing manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $300 and $200 respectively. Costs Incurred Production in Units 2,0004,000 Production Costs a. Direct Materials $6,000? b. Direct Labor 16,000? c. Utilities 1,000? d. Rent 3,000? e. Indirect Labor 4,200? f. Supervisory Salaries 1,500? g. Maintenance 1,000? h. Depreciation 2,500?\begin{array} { l r r } & { \text { Costs Incurred } } \\ \text { Production in Units } & 2,000 & 4,000 \\ \text { Production Costs } & & \\\hline \text { a. Direct Materials } & \$ 6,000 & ? \\\text { b. Direct Labor } & 16,000 & ? \\\text { c. Utilities } & 1,000 & ? \\\text { d. Rent } & 3,000 & ? \\\text { e. Indirect Labor } & 4,200 & ? \\\text { f. Supervisory Salaries } & 1,500 & ? \\\text { g. Maintenance } & 1,000 & ? \\\text { h. Depreciation } & 2,500 & ?\end{array} Production in Units Production Costs a. Direct Materials b. Direct Labor c. Utilities d. Rent e. Indirect Labor f. Supervisory Salaries g. Maintenance h. Depreciation Costs Incurred 2,000$6,00016,0001,0003,0004,2001,5001,0002,5004,000???????? Instructions
Calculate the expected costs to be incurred when production is 4000 units. Use your knowledge of cost behavior to determine which of the other costs are fixed or variable.
Mixed Costs
Expenses that contain both variable and fixed cost elements, changing in total with the level of activity but not in direct proportion.
Direct Materials
Raw materials that are directly traceable and integral to the finished product in the manufacturing process.
Production Costs
The total expenses incurred in the process of producing or manufacturing goods, including raw materials, labor, and overhead costs.
- Employ the high-low approach to dissect variable and fixed cost components using specific data.
- Determine and categorize expenses into variable, fixed, or mixed categories in specific scenarios.
Verified Answer
Production in Units ‾2,000‾4,000‾Production Costs‾ a. Direct Materials $6,000$12,000 b. Direct Labor 16,00032,000 c. Utilities 1,0001,700 d. Rent 3,0003,000 e. Indirect Labor 4,2008,400 f. Supervisory Salaries 1,5001,500 g. Maintenance 1,0001,800 h. Depreciation 2,5002,500\begin{array}{lrr} \underline{\text {Production in Units }}& \underline{2,000}& \underline{4,000}\\ \underline{\text {Production Costs}}\\ \text { a. Direct Materials } & \$ 6,000 & \$ 12,000 \\\text { b. Direct Labor } & 16,000 & 32,000 \\\text { c. Utilities } & 1,000 & 1,700 \\\text { d. Rent } & 3,000 & 3,000 \\\text { e. Indirect Labor } & 4,200 & 8,400 \\\text { f. Supervisory Salaries } & 1,500 & 1,500 \\\text { g. Maintenance } & 1,000 & 1,800 \\\text { h. Depreciation } & 2,500 & 2,500\end{array}Production in Units Production Costs a. Direct Materials b. Direct Labor c. Utilities d. Rent e. Indirect Labor f. Supervisory Salaries g. Maintenance h. Depreciation 2,000$6,00016,0001,0003,0004,2001,5001,0002,5004,000$12,00032,0001,7003,0008,4001,5001,8002,500
a. Variable $6,000÷2,000=$3.00 \$ 6,000 \div 2,000=\$ 3.00 $6,000÷2,000=$3.00 per unit; 4,000×$3.00=$12,000 4,000 \times \$ 3.00=\$ 12,000 4,000×$3.00=$12,000
b. Variable $16,000÷2,000=$8.00 \$ 16,000 \div 2,000=\$ 8.00 $16,000÷2,000=$8.00 per unit; 4,000×$8.00=$32,000 4,000 \times \$ 8.00=\$ 32,000 4,000×$8.00=$32,000
c. Mixed $1,000−$300=$700;$700÷2,000=$35 \$ 1,000-\$ 300=\$ 700 ; \$ 700 \div 2,000=\$ 35 $1,000−$300=$700;$700÷2,000=$35 per unit of variable costs; 4,000×$.35=$1,400+$300 4,000 \times \$ .35=\$ 1,400+\$ 300 4,000×$.35=$1,400+$300 (fixed) =$1,700 =\$ 1,700 =$1,700
d. Fixed $3,000 \$ 3,000 $3,000
e. \quad ariable $4,200÷2,000=$2.10 \$ 4,200 \div 2,000=\$ 2.10 $4,200÷2,000=$2.10 per unit; 4,000×$2.10=$8,400 4,000 \times \$ 2.10=\$ 8,400 4,000×$2.10=$8,400
f. Fixed $1,500 \$ 1,500 $1,500
g. Mixed $1,000−$200=$800 \$ 1,000-\$ 200=\$ 800 $1,000−$200=$800 variable portion; $800÷2,000=$,40 \$ 800 \div 2,000=\$, 40 $800÷2,000=$,40
4,000×$,40=$1,600+$200 4,000 \times \$, 40=\$ 1,600+\$ 200 4,000×$,40=$1,600+$200 (fixed portion) =$1,800 =\$ 1,800 =$1,800
h. Fixed $2.500 \$ 2.500 $2.500
Learning Objectives
- Employ the high-low approach to dissect variable and fixed cost components using specific data.
- Determine and categorize expenses into variable, fixed, or mixed categories in specific scenarios.
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