Exercise 6-29 Account-Classification Method; Food Processing (LO 6-1, 6-2, 6-5)

Chillicothe Meat Company produces one of the best sausage products in southern Ohio.

Required: 1. The companys controller used the account-classification method to compile the following (a) through (e) information:

Classify each cost item as variable, fixed, or semivariable. a. Depreciation schedules revealed that monthly depreciation on buildings and equipment is $19,000.

b. Inspection of several invoices from meat packers indicated that meat costs the company $1.10 per pound of sausage produced.

c. Wage records showed that compensation for production employees costs $0.70 per pound of sausage produced.

d. Payroll records showed that supervisory salaries total $10,000 per month.

e. Utility bills revealed that the company incurs utility costs of $4,000 per month plus $0.20 per pound of sausage produced.

2. Write a cost formula to express the cost behavior of the firms production costs. (Use the formula Y = a + bX, where Y denotes production cost and X denotes quantity of sausage produced.)

Required 1 Required 2 The company's controller used the account-classification method to compile the following (a) through (e) information. Classify each cost item as variable, fixed, or semivariable. a. Depreciation schedules revealed that monthly depreciation on buildings and equipment is $19,000. b. Inspection of several invoices from meat packers indicated that meat costs the company $1.10 per pound of sausage produced. c. Wage records showed that compensation for production employees costs $0.70 per pound of sausage produced. d. Payroll records showed that supervisory salaries total $10,000 per month. e. Utility bills revealed that the company incurs utility costs of $4,000 per month plus $0.20 per pound of sausage produced. Required 1 Required 2 Write a cost formula to express the cost behavior of the firm's production costs. (Use the formula Y = a + bx, where y denotes production cost and X denotes quantity of sausage produced.) (Round coefficient of X to 2 decimal places.) Production cost per month = X