July December Production in units 5,000 10,000 Variable costs 12,000 ? Fixed cos

Question

                                     July           December Production in units           5,000              10,000 Variable costs                  12,000                  ? Fixed costs                      ?                     18,000 Mixed costs                      10,000                  ? Total Costs                      40,000                59,000 a. Calculate missing costs b. Calculate the cost forumalacost uring the high-low method c. Calculate the total cost that would be incurred for the production of 8,000 units d. Identify the two key cost behavior assumptions made in the calculation of your answer to part c.
                                     July           December Production in units           5,000              10,000 Variable costs                  12,000                  ? Fixed costs                      ?                     18,000 Mixed costs                      10,000                  ? Total Costs                      40,000                59,000 a. Calculate missing costs b. Calculate the cost forumalacost uring the high-low method c. Calculate the total cost that would be incurred for the production of 8,000 units d. Identify the two key cost behavior assumptions made in the calculation of your answer to part c.

Explanation / Answer

July December Production in units 5,000 10,000 Variable costs 12,000 24,000 Fixed costs 18,000 18,000 Mixed costs 10,000 17,000 Total Costs 40,000 59,000 a. Calculate missing costs (Given above) b. Calculate the cost forumala cost uring the high-low method Variable cost = $12,000 / 5000 = $2.4 per unit Mixed cost Month Guest-Days Custodial of Occupancy Supplies Expense High level 10,000 17,000 Lowest level 5,000 10,000 Difference 5,000 7,000 Per Unit Mixed variable cost = 7,000 / 5,000 = $1.4 Fixed Mixed Cost = $3,000 Y = $ + $ X The formula will be Y= $3,000 + $1.4 X c. Calculate the total cost that would be incurred for the production of 8,000 units Production in units 8,000 Variable costs 19,200 Fixed costs 18,000 Mixed costs 14,200 Total Costs 51,400 d. Identify the two key cost behavior assumptions made in the calculation of your answer to part c. Fixed cost remains Fixed up to 10,000 units Mixed cost is fixed and variable as per rates calculated.

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