Question

Grand-cola spends $3 on direct materials, direct labor, and variable manufacturing overhead for every unit (12-pack...

Grand-cola spends $3 on direct materials, direct labor, and variable manufacturing overhead for every unit (12-pack of soda) it produces. Fixed manufacturing overhead costs

$3million per year. The plant, which is currently operating at only 80 %

of capacity, produced 15 million units this year. Management plans to operate closer to full capacity next year, producing 25

million units. Management doesn't anticipate any changes in the prices it pays for materials, labor, and manufacturing overhead.

1.

 What is the current total product cost (for the 15 million units), including fixed and variable costs?

2.

What is the current average product cost per unit?

3.

What is the current fixed cost per unit?

4.

 What is the forecasted total product cost next year (for the25 million units), including fixed and variable costs?

5.

What is the forecasted average product cost next year?

6.

What is the forecasted fixed cost per unit?

7.

Why does the average product cost decrease as production increases?
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SOLUTION

1. Total product costs = Total fixed costs + Total Variable costs

= $3 + ($3 * 15 )

= $3 + $45 = $48

2. Current Average product cost per unit = Total Product Costs / Current years produced units

= $48 / 15 = $3.2

3. Current fixed cost per unit = Total fixed costs / Current years produced units

= $3 / 15 = $0.20

4. Total product costs = Total fixed costs + Total Variable costs

= $3 + ($3 * 25 )

= $3 + $75 = $78

5. Forecasted average product cost per unit = Forecasted total product costs / Next year's forecasted units

= $78 / 25 = $3.12

6. Forecasted fixed cost per unit = Total fixed costs / Next year's forecasted units

= $3 / 25 = $0.12

7. The average product cost decreases as production volume increases because the company is spreading the fixed costs over 10 million more units. The company will be operating more efficiently, so the average cost of making each unit decreases.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Direct materials were $3 per unit, Direct labor was $2 per unit, variable overhead was...
1. Direct materials were $3 per unit, Direct labor was $2 per unit, variable overhead was $1. Fixed costs were $1000. On a piece of scrap paper do a flexible budget for 1000 and 1500 units. Budgeted variable overhead for 1000 units is Total cost for 1000 units is Total costs for 1500 units is Direct labor for 1500 units is A. 1000 B. some other number C. $10,000 D. $7000 E. $3000
Following are unit costs- Direct Materials: $7.00 Direct Labor: $5.30 Variable Manufacturing overhead: $1.50 Fixed Manufacturing...
Following are unit costs- Direct Materials: $7.00 Direct Labor: $5.30 Variable Manufacturing overhead: $1.50 Fixed Manufacturing Overhead: $5.90 Variable Selling Expenses: $2.10 Fixed Selling Expenses: $3.40 Normal Selling price is $30 per unit. A Special order of $20 per unit is received for 10,000 unites It would not affect normal sales. Required: Should the order be accepted? Show Calculations
The following manufacturing costs were incurred by the Walmart Company in 2019: Direct Materials $112,500 Direct...
The following manufacturing costs were incurred by the Walmart Company in 2019: Direct Materials $112,500 Direct Labor $175,000 Manufacturing overhead $235,000 These costs were incurred to produce 25,000 units of product. Variable manufacturing overhead was 80% of the direct materials cost. In 2020, the direct material and variable overhead costs per unit will increase by 15%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 7.5%. The company is...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50 Direct labor...................................................................................................................... $6.00 Artist's royalties.............................................................................................................. $5.00 Manufacturing overhead.......................................................................................... $3.50 Selling expenses............................................................................................................ $2.50 Total variable costs per unit............................................................ $22.50 Annual fixed costs: Manufacturing overhead.......................................................................................... $192,000 Selling and administrative....................................................................................... $276,000 Total fixed costs................................................................................ $468,000 Forecasted annual sales volume (120,000 units)......................... $3,240,000 Management estimates that direct-labor costs will increase by 8% next year. How many units will the company have to sell next year to reach its...
Prepare the sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, SGA...
Prepare the sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, SGA budget, and budgeted income statement for ABC Company for the year, given the following information: ABC expects to sell 10,000 units for the year at $175 per unit. ABC Company begins the year with 2,000 units and desires ending inventory of 7,000 units. To produce 1 unit, it takes the following: DIRECT MATERIALS: To produce 1 unit: 10 pounds Waste per unit: 1 pound...
Direct Materials, Direct Labor, and Reports budgeted and actual costs for variable and fixed factory overhead...
Direct Materials, Direct Labor, and Reports budgeted and actual costs for variable and fixed factory overhead along with the related controllable and volume variances.Factory Overhead Cost Variance Analysis Mackinaw Inc. processes a base chemical into plastic. A detailed estimate of what a product should cost.Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,800 units of product were as follows: Standard Costs Actual Costs Direct materials 8,800 lb. at $4.90 8,700...
1- Costs for direct materials, direct labor and manufacturing overhead are assigned to each job. True...
1- Costs for direct materials, direct labor and manufacturing overhead are assigned to each job. True or false 2- J&A Corporation has a monthly target operating income of $35,000. Variable expenses are 30% of sales and monthly fixed expenses are $7,000. What is the monthly margin of safety in dollars if the business achieves its operating income goal? A) $60,000 B) $70,000 C) $50,000 D) $21,000 3- At Dwight Incorporated, total fixed and variable costs are $430,000 at a production...
Burns Company incurred the following costs during the year: direct materials $23.50 per unit; direct labor...
Burns Company incurred the following costs during the year: direct materials $23.50 per unit; direct labor $15.30 per unit; variable manufacturing overhead $17.50 per unit; variable selling and administrative costs $9.60 per unit; fixed manufacturing overhead $126,000; and fixed selling and administrative costs $11,000. Burns produced 6,300 units and sold 6000 units. Determine the manufacturing cost per unit under (a) absorption costing and (b) variable costing. (Round answers to 2 decimal places, e.g. 52.75.)
Cost Item Amount Direct Materials Used $140,000 Direct Manufacturing Labor Costs (workers are pd hourly) $22,000...
Cost Item Amount Direct Materials Used $140,000 Direct Manufacturing Labor Costs (workers are pd hourly) $22,000 Plant Utility Costs $5,000 Indirect Manufacturing Labor Costs—Variable $18,000 Indirect Manufacturing Labor Costs—Fixed $14,000 Other Indirect Manufacturing Costs—Variable $8,000 Other Indirect Manufacturing Costs—Fixed $26,000 Marketing, Distribution & Customer-Service Variable Costs $120,000 Marketing, Distribution & Customer-Service Fixed Costs $43,000 Fixed Administrative Costs $54,000 Inventory Data Beginning Ending Direct Materials 202,300 feet 2300 feet Work in Process 0 units 0 units Finished Goods 0 units ?...
since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing...
since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing units of product, these costs are debited to A.) The direct materials Inventory, Direct Labor, and Manufacturing overhead accounts B.) Expense Accounts C.) The cost of goods sold account. D.) The work in Process Inventory Account
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT