Question

Morning Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0–1,500 units, and monthly production costs for the production of 1,200 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses. Production Costs Total Cost Direct materials $ 1,900 Direct labor 7,500 Utilities ($140 fixed) 570 Supervisor’s salary 2,800 Maintenance ($310 fixed) 460 Depreciation 800

Required: 1. Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit (or combination thereof). (Round your per unit value to 2 decimal places.)

Production Costs	Behavior	Rate
Direct Materials			per Unit		per Month
Direct labor			per Unit		per Month
Utilities			per Unit		per Month
Supervisor’s Salary			per Unit		per Month
Maintenance			per Unit		per Month
Depreciation			per Unit		per Month

2. Determine the total fixed cost per month and the variable cost per unit for Morning Dove. (Round your variable cost per unit to 2 decimal places.)

Total Variable Cost per Unit
Total Fixed Cost per Month

3. State Morning Dove’s linear cost equation for a production level of 0–1,500 units. Enter answer as an equation in the form of y = a + bx. (Round your variable cost per unit to 2 decimal places.)

Total Cost =

+

x

4. Calculate Morning Dove’s expected total cost if production increased to 1,400 units per month. Enter answer as an equation in the form of y = a + bx. (Round Variable cost per unit to 2 decimal places.)

a	+	b	X	x	=	y
						$

Answer 1

Answer

1.

Production Costs	Behavior	Total Cost	Rate
Direct Material	Variable	1900	1.583	Per Unit		Per Month
Direct Labor	Variable	7500	6.250	Per Unit		Per Month
Utilities	Mixed	570	0.358	Per Unit	140	Per Month
Supervisor's Salary	Fixed	2800		Per Unit	2800	Per Month
Maintenance	Mixed	460	0.125	Per Unit	310	Per Month
Depreciation	Fixed	800		Per Unit	800	Per Month
Total			8.317	Per Unit	4050	Per Month

2.

Total Variable Cost per Unit = $8.317 per unit

Total Fixed Cost per month = $4,050 per month

3.

Y = $4,050 + $8.317x

Y = Total Cost

X = No. of Units

4.

Total cost for 1,400 Units

= $4,050 + $8.317 * 1,400 Units

Total cost for 1,400 Units = $15,693.8