Total fixed costs and variable costs per unit

HW #3 – Chapter 2

 

Directions: Answer all three questions. Please submit your work in Word or PDF formats only. You can submit an Excel file to support calculations, but please “cut and paste” your solutions into the Word or PDF file. Be sure to show how you did your calculations. Also, please be sure to include your name at the top of the first page of your file.

 

Question #1

a)      A company estimates that its total cost( look at hint)  to send out invoices, receive payments, deposit the payments, and update accounting records was $10 per sale in 2014. In 2014, there were 10,000 sales and fixed costs of $60,000. In 2015, the company expects total fixed costs and variable costs per unit to be the same as in 2014. If the company budgets 10,500 sales in 2015, what are the expected total costs and expected costs per unit for 2015?

b)      Assume the same facts as in part a, except the company expects 9,500 sales in 2015. What are the expected total costs and expected costs per unit for 2015?

 

HINT: TOTAL COSTS  = FIXED COST + VARIABLE COST. So you have to figure out Variable cost and Fixed cost from this cost.

 

Question #2

a)      A company estimates that its total cost to acquire materials, set up machines, and produce products is $25 per unit produced in 2014. In 2014, there were 50,000 units produced and variable costs per unit produced totaled $15. In 2015, the company expects total fixed costs and variable costs per unit to be the same as in 2014. If the company budgets to produce 52,000 units in 2015, what are the expected total costs and expected costs per unit for 2015?

b)      Assume the same facts as in part a, except the company expects to produce 49,000 units in 2015. What are the expected total costs and expected costs per unit for 2015?

 

Question #3

The Bear Company collected the following monthly information on units produced and electricity costs:

 

Month Units Produced Electricity Costs
January 50,000 $78,000
February 48,000 $74,500
March 47,000 $72,000
April 54,000 $81,000
May 58,000 $86,000
June 53,000 $79,500

 

 

Using the high-low method, prepare an estimate of electricity costs for July, assuming 53,500 units are expected to be produced in July.


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