Copper Hill Inc. manufactures laser printers within a relevant range of producti

Question

Copper Hill Inc. manufactures laser printers within a relevant range of production of 50,000 to 70,000 printers per year. The following partially completed manufacturing cost schedule has been prepared: Number of Printers Produced 70,000 90,000 100,000 Total costs: Total variable costs $350,000 (d) (j) Total fixed costs 630,000 (e) (k) Total costs $980,000 (f) (l) Cost per unit: Variable cost per unit (a) (g) (m) Fixed cost per unit (b) (h) (n) Total cost per unit (c) (i) (o) Complete the preceding cost schedule, identifying each cost by the appropriate letter (a) through (o).

Explanation / Answer

Normally if production exceeds the maximumrelevant range,variable costsper unit would increase because of such things as overtime pay. Fixed costs per unit might also increase because of added machinery costs, utilities, supervision, etc. But since no information is given on those types of items, we can only calculate on what we are given.

Since the maximum relevant range is 70,000, fixed cost per unit will remain the same but totalfixed costswill rise in relation to how many printers are produced. Variable costs per unit will remain the same, but total variable costs will also rise in relation to how many units are produced.

Number of Printers Produced
70,000 90,000 100,000
Total costs:
Total variable costs $350,000 (d) 90,000 x 5 = $450,000 (j) 100,000 x 5 = $500,000
Total fixed costs 630,000 (e) 90,000 x 9 = $810,000 (k) 100,000 x 9 = $900,000
Total costs $980,000 (f) $1,260,000 (l) $1,400,000
Cost per unit:
Variable cost per unit (a) 350,000 / 70,000 = $5 (g) $5 (m) $5
Fixed cost per unit (b) 630,000 / 70,000 = $9 (h) $9 (n) $9
Total cost per unit (c) $14 (i) $14 (o) $14

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