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1. Baaca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.

[pic]

The best estimate of the total variable manufacturing cost per unit is:

First, calculate the variable manufacturing overhead cost per unit:

Variable manufacturing overhead cost = Change in cost [pic] Change in activity

= ($1,015,000 - $1,003,200) [pic] (7,000 - 6,000) = $11.80

Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $1,015,000 - ($11.80 x 7,000) = $932,400

Variable direct materials cost = $340,200 [pic] 6,000 units = $56.70

Variable direct labor cost = $81,000 [pic] 6,000 units = $13.50

Total variable manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead

Total variable manufacturing cost per unit = $56.70 + $13.50 + $11.80 = $82.00

2. Maxwell Company has a total expense per unit of $2.00 per unit at the 16,000 level of activity and total expense per unit of $1.95 at the 21,000 unit level of activity. The best estimate of the total fixed cost per period for Maxwell Company is:

To calculate the variable manufacturing cost per unit:

[pic]

Variable manufacturing overhead cost = Change in cost [pic] Change in activity = ($40,950 - $32,000) [pic] (21,000 - 16,000) = $1.79

Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $40,950 - ($1.79 x 21,000) = $3,360

3. Inspection costs at one of Pulley Corporation's factories are listed below:

[pic]

Management believes that inspection cost is a mixed cost that depends on units produced. Using the high-low method, the estimate of the variable component of inspection cost per unit produced is:

Variable cost = Change in cost [pic] Change in activity = ($10,875 - $9,980) ( (799 - 711) = $10.17 (rounded)

4. In October, Haldeman Corporation, a manufacturing company, reported the following financial data:

[pic]

The company had no beginning or ending inventories. The contribution margin for October was:

[pic]

5. Baaca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total cost to manufacture 6,300 units is…

First, calculate the variable manufacturing overhead cost per unit:

Variable manufacturing overhead cost = Change in cost [pic] Change in activity

= ($1,015,000 - $1,003,200) [pic] (7,000 - 6,000) = $11.80

Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $1,015,000 - ($11.80 x 7,000) = $932,400

Variable direct materials cost = $340,200 [pic] 6,000 units = $56.70

Variable direct labor cost = $81,000 [pic] 6,000 units = $13.50

Total variable manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead

Total variable manufacturing cost per unit = $56.70 + $13.50 + $11.80 = $82.00

Y = $932,400 + ($82.00 x 6,300) = $1,449,000

6. Bakken Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

[pic]

The best estimate of the total variable manufacturing cost per unit is:

Direct materials and direct labor are entirely variable since cost per unit does not change with changes in volume. Thus none of these costs are fixed and only manufacturing overhead is used to calculate the monthly fixed manufacturing cost.

First, calculate the variable manufacturing cost per unit:

[pic]

Variable manufacturing overhead cost = Change in cost [pic] Change in activity

= ($542,500 - $526,000) [pic] (5,000 - 4,000) = $16.50

Variable manufacturing cost = $45.50 + $44.90 + $16.50 = $106.90

7. The following data pertains to activity and the cost of electricity for two recent months:

[pic]

The best estimate of the total monthly fixed electrical cost is:

To calculate the variable manufacturing cost per unit:

[pic]

Variable manufacturing overhead cost = Change in cost [pic] Change in activity

= ($1,800 - $1,500) [pic] (5,000 - 4,000) = $0.30

Fixed cost element of manufacturing overhead = Total cost - Variable cost element

= $1,800 - ($0.30 x 5,000) = $300

8. Supply costs at Rupard Corporation's chain of gyms are listed below

[pic]

Management believes that supply cost is a mixed cost that depends on client-visits. Using the high-low method to estimate the variable and fixed components of this cost, those estimates would be closest to:

Variable cost = Change in cost [pic] Change in activity

= ($28,707 - $28,093) [pic] (13,968 - 13,166) = $0.77

Fixed cost element = Total cost - Variable cost element

= $28,707 - ($0.77 x 13,968) = $17,952

Therefore, the cost formula for total supply cost is $17,952 per period plus $0.77 per client-visit, or Y = $17,952 + $0.77X

9. The following information was collected for one of the costs at Demetra Manufacturing Corporation over the past two years

[pic]

Assuming that there has been no change in the cost structure over the last two years and this activity is within the relevant range, this cost at Demetra would best be described as a

Mixed Cost

Variable component of cost:

Variable cost = Change in costs [pic] Change in units

Variable cost = ($147,000 - $125,000) [pic] (6,000 - 5,000)

Variable cost = $22.00 per unit

Fixed cost:

High units: $147,000 - $22.00 x 6,000 = $15,000

Low units: $125,000 - $22.00 x 5,000 = $15,000

Since there is a variable component and a fixed component, this cost would be considered to be a mixed cost.

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