Krogan Company produces door stoppers. August production costs are below: Door S

Question

Krogan Company produces door stoppers. August production costs are below:

Door Stoppers produced                    80,000

Direct material (variable)                                            $20,000

Direct labor (variable)                                               40,000

Supplies (variable)                                                      20,000

Supervision (fixed)                                                      25,300

Depreciation (fixed)                                                    20,000

Other (fixed)                                                                4,800

In September, Krogan expects to produce 100,000 door stoppers. Assuming no structural changes, what is Krogan's production cost per door stopper for September?

Explanation / Answer

TOTAL variable cost Per unit for Krogan = 20,000+40,000+20,000)/80000 = $1 per unit

TOtal fixed cost = 25,300+20,000+4,800 = 50,100

For September,

Total cost for 100,000 = 100,000*1+50,100 = $150,100

Total Prduction cost per door stopper = 150,100/100,000 = $1.501 per door

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