Limone Motors manufactures hybrid sports utility vehicles (SUVs). Limone incurs monthly depreciation costs of $25,000,000 on its
Question:
Limone Motors manufactures hybrid sports utility vehicles (SUVs). Limone incurs monthly depreciation costs of $25,000,000 on its highly automated plant machinery and warehousing facility. Also, each SUV requires materials and manufacturing overhead resources. On average, the company uses37,500,000 pounds of aluminum to manufacture 75,000 SUVs per month. Each pound of aluminum costs $1.20. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $750,000,000 of variable manufacturing overhead resources to produce 75,000 SUVs per month.
Required:
1. Create a formula for the monthly cost of SUVs for Limone.
2. If Limone expects to manufacture 60,000 SUVs next month, what is the expected fixed cost (assuming that 60,000 units is within the company’s current relevant range)? Total variable cost? Total manufacturing cost (i.e., both fixed and variable)?
Step by Step Answer:
Managerial Accounting The Cornerstone Of Business Decision Making
ISBN: 9780357715345
8th Edition
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger