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Question#1. Sweetness, Inc. budgeted production for 12,000 cases of candy during May. The cost per case...

Question#1. Sweetness, Inc. budgeted production for 12,000 cases of candy during May. The cost per case at that level is $20 (DM $7; DL $8, MOH $5 (VMOH $3 and FMOH $2). Assuming the same cost structure, what would the unit cost be if 10,000 cases were produced? (Use two decimals.)

Question#2. Sweetness, Inc. budgeted production for 12,000 cases of candy during May. The cost per case at that level is $20 (DM $7; DL $8, MOH $5 (VMOH $3 and FMOH $2). Assuming the same cost structure, what would the unit cost be if 20,000 cases were produced? (Use two decimals.)

PS. Answers 20.4 and 19.2 were incorrect!

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Answer #1

Solution 1:

Variable Cost per unit = DM + DL + Variable MOH = $7+$8+ $3 = $18 per unit

Fixed cost = 120000 * Fixed MOH = 12000 * $2 = $24,000

If 10,000 cases are produced, Total cost = Variable Cost + Fixed Costs = 10000 * $18 + $24000 = $204,000

Unit Cost = Total Cost / Units = $204000 / 10000 = $20.4

Solution 2:

Variable Cost per unit = DM + DL + Variable MOH = $7+$8+ $3 = $18 per unit

Fixed cost = 120000 * Fixed MOH = 12000 * $2 = $24,000

If 20,000 cases are produced, Total cost = Variable Cost + Fixed Costs = 20000 * $18 + $24000 = $384,000

Unit Cost = Total Cost / Units = $384000 / 20000 = $19.2

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