Question

Sandburg Manufacturing manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2,000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $300 and $200, respectively.

                                                                              Costs Incurred             

Production in Units                                     2,000                              4,000

Production Costs

1. Direct Materials $ 6,000                                  ?
2. Direct Labor 16,000                                  ?
3. Utilities 1,000                                  ?
4. Rent 3,000                                  ?
5. Indirect Labor 4,200                                  ?
6. Supervisory Salaries 1,500                                  ?
7. Maintenance 1,000                                  ?
8. Depreciation 2,500                                  ?

Instructions

Calculate the expected costs to be incurred when production is 4,000 units. Use your knowledge of cost behavior to determine which of the other costs are fixed or variable

Answer 1

	Costs Incurred		Working
Production in Units	2,000	4,000	Cost Behaviour	Fixed Portion	Variable per unit
Production Costs
Direct materials	6000	12000	Variable	0	3.00
Direct labor	16000	32000	Variable	0	8.00
Utilities	1000	1700	Mixed	300	0.35
Rent	3000	3000	Fixed	3000	0.00
Indirect labor	4200	8400	Variable	0	2.10
Supervisory salaries	1500	1500	Fixed	1500	0.00
Maintenance	1000	1800	Mixed	200	0.40
Depreciation	2500	2500	Fixed	2500	0.00