PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively
| Production in Units |
3,000 |
| Production Costs | |
| Direct materials |
$ 7,500 |
| Direct labor |
18,000 |
| Utilities |
2,100 |
| Property taxes |
1,000 |
| Indirect labor |
4,500 |
| Supervisory salaries |
1,900 |
| Maintenance |
1,100 |
| Depreciation |
2,400 |
A) Identify the above costs as variable, fixed, or mixed.
b)Calculate the expected costs when production is 5,000 units.
Answer:
a)
| Direct Materials- Variable |
| Direct Labor- Variable |
| Utilities- Mixed |
| Property Taxes- Fixed |
| Indirect Labor- Variable |
| Supervisory Salaries- Fixed |
| Maintenance- Mixed |
| Depreciation- Fixed |
B)
Per-unit Variable costs:
Direct Materials = $7,500/3,000 units = $2.50 per unit
Direct Labor = $18,000/3,000 units = $6 per unit
Utilities = ($2,100 – $300)/3,000 units = $0.60 per unit
Indirect Labor = $4,500/3,000 units = $1.50 per unit
Maintenance = ($1,100 – $200)/3,000 units = $0.30 per unit
Expected costs when production is 5,000 units:
Direct Materials = $2.50 x 5,000 = $12,500
Direct Labor = $6 x 5,000 = $30,000
Utilities = $300 fixed + ($0.60 x 5,000) = $3,300
Property Taxes = $1,000 fixed
Indirect labor = $1.50 x 5,000 = $7,500
Supervisory Salaries = $1,900 fixed
Maintenance = $200 fixed + ($0.3 x 5,000) = $1,700
Total Cost: $57,900
