please explain how you got your answer Branden wilcox- shot 9.28 PM Cost Formula

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please explain how you got your answer

Branden wilcox- shot 9.28 PM Cost Formula Princeton Manufacturing Company summarizes the following total cost data for the month of March. Prin normal capacity per month of 25,000 units of product that sell for $40 each. For the foreseeable future,sales volume should ceton has a 0.00 points out of 1.00 equal normal capacity of production. $295,000 165,000 85,000 140,000 80,000 Administrative expense (fixed) 56,000 $821,000 Direct material Direct labor Variable overhead Fixed overhead (Note 1) Selling expense (Note 2) Notes 1. Beyond normal capacity, fixed overhead cost increases $6,350 for each 1,000 units or fraction thereof until a maximum capacity of 30,000 units is reached. 2. Selling expenses are a 5% sales commission plus shipping costs of $1.20 per unit. a. Using the information available, prepare a formula to estimate Princeton's total cost at various production volumes up to normal capacity Total cost-0 |+s0 x # of units. b. Prove your answer in requirement (a) relative to the total cost figure for 25,000 units Total cost Fixed cost Variable cost 0 c. Calculate the planned total cost at 20,000 units. $ d. If Princeton were operating at normal capaci the order to earn a net income before income tax of $8 per unit on the new sale? Required selling prices 0 per unit ty and accepted an order for 500 more units, what would it have to charge for ver It t Foddy Check

Explanation / Answer

Total Variable cost: Direct material 295000 Direct Labour 165000 Variable Overheads 85000 Sales commission ($1000,000*5%) 50000 Shipping cost (25000 units @$1.20) 30000 Total Variable cost: 625000 Divide: Number of units 25000 Unit Variable cost 25 Total fixed cost: fixed overheads 140,000 Admin overheads 56000 Total fixed cost: 196000 Req a: Let 'X' be the numbere of units sold Total cost = 196,000 + 25X Req b: Total cost for 25000 units Total cost = 196000 + 25*25000 = $821,000 Hence proved. Req C: Cost for 20,000 units: Total cost = 196000 + 25*20000 = $696,000 Req D: Selling price for order of500 units: Additional cost for 500 units: Variable cost (500 units @$25) 12500 Add: Additional fixed cost 6350 Total cost 18850 Add: Normal profits (500 units @$8) 4000 Expected sales of 500 units 22850 Selling price for order of500 units: 45.7 Required Selling Price :   $45.70 per unit

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