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 0–1,800 units, and monthly production costs for the production of 1,300 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses.  

Production Costs	Total Cost
Direct materials	$	2,700
Direct labor		7,100
Utilities ($110 fixed)		600
Supervisor’s salary		3,100
Maintenance ($320 fixed)		510
Depreciation		700

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).

2. Determine the total fixed cost per month and the variable cost per unit for Morning Dove.

3. State Morning Dove’s linear cost equation for a production level of 0–1,800 units. Enter answer as an equation in the form of y = a + bx.

4. Calculate Morning Dove’s expected total cost if production increased to 1,500 units per month. Enter answer as an equation in the form of y = a + bx.

Answer 1