Question

Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 0–1,500 units, and monthly production costs for the production of 500 units follow. Morning Dove’s utilities and maintenance costs are mixed with the fixed components shown in parentheses.
Production Costs ... Total Cost
Direct materials ..... $1,500
Direct labor ..... 7,500
Utilities ($100 fixed) ... 650
Supervisor’s salary ... 3,000
Maintenance ($280 fixed) . 480
Depreciation ...... 800

Required:
1. Identify each cost as variable, fixed, or mixed, and express each cost as a rate per month or per unit (or combination thereof). State any assumptions you make.
2. Determine the total fixed cost per month and the variable cost per unit for Morning Dove.
3. State Morning Dove’s linear cost equation for a production level of 0–1,500 units.
4. Calculate Morning Dove’s expected total cost if production increased to 1,200 units per month.



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  • CreatedFebruary 27, 2015
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