plumview printers makes stationery sets of 100 percent rag content edged in 24 k
ID: 2365360 • Letter: P
Question
plumview printers makes stationery sets of 100 percent rag content edged in 24 karat gold. in an average month, the firm produces 80,000 boxes of stationery; each box contanis 100 pages of stationery and 80 envelops. Production costs are incurred for paper, ink, glue, and boxes. the company manufactures this product in batches of 500 boxes of a specific stationery design. the following data have been extracted from the companies accounting records for June 2010:
cost of paper for each batch $10,000
cost of ink and glue for each batch 1,000
cost of 1,000 gold boxes for each batch 32,000
direct labor for producing each batch 16,000
cost of designing each batch 20,000
Overhead charges total $408,000 per month and are considered fully fixed for purposes of cost estimation.
a. what is the cost per box of stationery based on average production volume?
Explanation / Answer
According to the given information, Cost per box of stationery is calculated by first calculating the total cost of stationery and dividing it by the number of boxes of stationery. To find the total cost, we have to find the fixed cost and variable cost of stationery. From the given data, Cost of paper is a variable cost and Cost of ink and glue is a variable cost. Cost of 1,000 gold boxes for each batch is a fixed cost becasue the cost is fixed for batch. Direct labor for producing each batch is fixed cost. Cost of designing each batch is fixed. Also fixed overhead charges per month is $408,000 The given data for each batch will be converted to 80,000 boxes of stationery.To convert we have to find the value by how many times the batches will become 80,000 boxes of stationery. To know this value, Number of times = 80,000 / 500 = 160 times Calculating the total cost for 80,000 boxes of stationery: Cost of paper for 80,000 boxes of stationery = $10,000 x 160 = $1,600,000 Cost of ink and glue for 80,000 boxes of stationery = 1,000 x 160 = $160,000 Therefore, the total variable cost = 1,600,000 + $160,000 = $1,760,000 Cost of 1,000 gold boxes for 80,000 boxes of stationery = 32,000 x 160 = $5,120,000 Cost of direct labor for producing 80,000 boxes of stationery = 16,000 x 160 = $2,560,000 Cost of designing 80,000 boxes of stationery = 20,000 x 160 = $3,200,000 Total fixed cost = $5,120,000 + $2,560,000 + $3,200,000 + $408,000 = $11,288,000 Therefore, the total fixed cost is $11,288,000 Total cost = Total variable cost + Total fixed cost = $1,760,000 + $11,288,000 = $13,048,000 Cost per each box of stationery = $13,048,000 / 80,000 = $163 Therefore, on average per month the cost per each box of stationery is $163Related Questions
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