Ramirez Company manufactured 60,000 units of product last year and identified th
ID: 2350054 • Letter: R
Question
Ramirez Company manufactured 60,000 units of product last year and identified the following costs associated with the manufacturing activity:Ramirez Company manufactured 60,000 units of product last year and identified the following costs associated with the manufacturing activity:
Variable costs:
Direct materials used $ 1,020,000
Direct labor 2,240,000
Indirect materials and supplies 240,000
Power to run plant equipment 280,000
Fixed costs:
Supervisory salaries 930,000
Plant utilities (other than power to run plant equipment) 220,000
Depreciation on plant and equipment (straight-line, time basis) 135,000
Property taxes on building 195,000
Required:
Unit variable costs and total fixed costs are expected to remain unchanged next year. Calculate the unit cost and the total cost if 51,000 units are produced next year. (Round your answers to 2decimal places. Use unrounded unit cost for the calculation of Total cost. Omit the "$" sign in your response.)
Explanation / Answer
Variable costs: Direct materials used $ 1,020,000 Direct labor 2,240,000 Indirect materials and supplies 240,000 Power to run plant equipment 280,000 Total Variable Costs = 3,780,000 Variable Costs Per Unit = 3,780,000 / 60,000 = $63 per unit Although total variable costs will change, per unit variable costs will remain the same. Fixed costs: Supervisory salaries 930,000 Plant utilities (other than power to run plant equipment) 220,000 Depreciation on plant and equipment (straight-line, time basis) 135,000 Property taxes on building 195,000 Total Fixed Costs = 1,480,000 This is just the opposite of variable costs. Although total fixed costs will not change, per unit fixed costs will change. 1,480,000 + (51,000 x 63) = $4,693,000 Total cost for 51,000 units 4,693,000 / 51,000 = $92.02 unit cost
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