Excel Analytics 2-74: Basic Cost Behaviors: Visualization

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Salvay Company is a small manufacturer that produces and sells one product for use in medical instruments. Demand is erratic and can vary widely from year to year. The financial managers at Salvay are planning for the coming year and have asked for your help in forecasting unit costs and gross margin.

Stacey Choo, the cost accountant at Salvay, provides you with information about the components of manufacturing costs along with specifying the behavior of the components. This information is summarized in the memo on the next page.

Stacey also tells you that the company has a zero-inventory policy and all projections are made under that assumption. Finally, she points out that capacity constraints require assuming a second shift for the year if annual production volume exceeds 600,000 units.

The marketing manager tells you that the best estimate of the price of the product is $20 per unit. His best guess is that demand could be as low as 500,000 units or as high as 750,000 units.

Salvay Company Memo:

To: Jorge Alcala, Controller

From: Stacey Choo, Cost Accountant

Date: November 3.

Subject: Cost Information Projections

As you requested, the following table summarizes our best estimates for manufacturing costs for the upcoming fiscal year. These estimates are valid for any reasonable range of production.

Cost Category	Cost Behavior	Cost Information
Direct costs:
Materials	Semi-variable	If production volume is below 550,000 units, we can source all our materials from Bourke Supplies at $3.00 per unit. This is a negotiated price. For any production greater than this, we will have to pay the going market price of $4.80 per unit.
Labor	Variable	$4.50 per unit.
Overhead:
Indirect plant labor	Variable	$2.25 per unit.
Indirect plant supplies	Variable	$1.25 per unit.
Machine depreciation	Fixed	$218,000 per year.
Plant depreciation	Fixed	$102,000 per year.
Plant maintenance	Step	$105,000 per shift.
Plant supervision	Step	$280,000 per shift.
Plant utilities	Step	$210,000 for production up to 800,000 units; $350,000 (total) if production is over 800,000 units.
Property taxes on plant	Fixed	$65,000 per year.

Stacey Choo would like a presentation for the CFO and Controller at Salvay discussing the estimated gross margins. They are especially interested in the effect of the individual cost items on the gross margins. Stacey also mentions that both managers like to see visual support for any conclusions.

Excel Analytics PR 2-74: Basic Cost Behaviors: Visualization

Required

Compute the cost per unit and the gross margin per unit assuming output and sales of:

a. 500,000 units.

b.750,000 units.

Help with this i don't need the excel if you don't wanna do that i just need help on the questions below related to the above information

Questions

What is the Gross Margin per Unit if 500,000 units are produced and sold?

A 12.96 is not this one already tried

B 7.5

C 5.46

D 7.04

2. What is the Total Overhead per Unit if 750,000 units are produced and sold?

$5.32 this answer is right leave it be

3. What is the Direct Cost per Unit if 500,000 units are produced and sold?

$7.50 this answer is right leave it be

4. Direct Materials comprise what percentage of total costs if 500,000 units are produced and sold?

A 23

B 26

C 34 is not this one already tried it

D 35

5. Plant Utilities comprise what percentage of total costs if 750,000 units are produced and sold?

A1%

B2% is not this one already tried

C3%

D4%