Question

Casual clothing is a company that makes clothing from recycled material and distributes it to poor communities at affordable prices.

Total cost for the rental of 5 delivery vehicles is R25,000. Total fuel cost travelled 6,780 in total - 81360.

	December				January				February				March
Total other overhead costs	R	25,000			R	35,000			R	31,000			R	60,000
Number of clothing pieces made		5,000				10,000				8,000				20,000

Other overhead costs for the months of February and March were as follows:

The rental cost of the 5 delivery vehicles will be seen as a ............................. cost that will be ........................ per unit but .................... in total with change in the number of clothing items made. The total fuel cost will be seen as a ............................... cost that will be ...................... per kilometer but ................................. in total with a change in the number of kilometers travelled. The fixed portion of the other overhead costs for the manufacturing of 6,000 units is .................. The Cost to deliver the manufactured water tank to the premises of clients will be classified by Go-Go as ...................................

Answer 1

The rental cost of the 5 delivery vehicles will be seen as a fixed cost that will be different per unit but remain same in total with change in the number of clothing items made. The total fuel cost will be seen as a variable cost that will be same per kilometer but changes in total with a change in the number of kilometers travelled. The fixed portion of the other overhead costs for the manufacturing of 6,000 units is 13400. The Cost to deliver the manufactured water tank to the premises of clients will be classified by Go-Go as Variable Selling cost.

Other Overhead
Variable Cost per unit = (60000-25000) / (20000-5000) = 2.33 per unit
Fixed Cost = 60000 - 20000 x 2.33 = 13400