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 0–1,600 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	$	2,300
Direct labor		6,700
Utilities ($110 fixed)		640
Supervisor’s salary		3,100
Maintenance ($330 fixed)		500
Depreciation		750

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 0–1,600 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 1,200 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

1.

	Production Costs Behavior Rate Direct Materials Variable 1.92 per Unit per Month Direct labor Variable 5.58 per Unit per Month Utilities Mixed 0.44 per Unit 110 per Month Supervisor’s Salary Fixed per Unit 3100 per Month Maintenance Mixed 0.14 per Unit 330 per Month Depreciation Fixed per Unit 750 per Month

2.

Total Variable Cost per Unit = 1.92 + 5.58 + 0.44 + 0.14 = 8.08

Total Fixed Cost per Month = 110+ 3100 + 330 + 750 = 4290

3.

Y = a + bx

Y = 4290 + 8.08(x)

4.

  

a	+	b	X	x	=	y
4290	+	8.08	X	1200	=	13986