The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period. Month Total Production Costs Level of Activity (Units Produced) July $ 230,000 3,500 August 250,000 3,750 September 260,000 3,800 October 220,000 3,400 November 340,000 5,800 December 330,000 5,500 January 200,000 2,900 February 210,000 3,300 March 240,000 3,600 April 380,000 5,900 May 350,000 5,600 June 290,000 5,000 Required: Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.) In view of the department’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.
The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period. Month Total Production Costs Level of Activity (Units Produced) July $ 230,000 3,500 August 250,000 3,750 September 260,000 3,800 October 220,000 3,400 November 340,000 5,800 December 330,000 5,500 January 200,000 2,900 February 210,000 3,300 March 240,000 3,600 April 380,000 5,900 May 350,000 5,600 June 290,000 5,000 Required: Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.) In view of the department’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.
|
Month |
Total Production Costs |
Level of Activity (Units Produced) |
|
July |
$ 230,000 |
3,500 |
|
August |
250,000 |
3,750 |
|
September |
260,000 |
3,800 |
|
October |
220,000 |
3,400 |
|
November |
340,000 |
5,800 |
|
December |
330,000 |
5,500 |
|
January |
200,000 |
2,900 |
|
February |
210,000 |
3,300 |
|
March |
240,000 |
3,600 |
|
April |
380,000 |
5,900 |
|
May |
350,000 |
5,600 |
|
June |
290,000 |
5,000 |
Required:
- Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)
- In view of the department’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.
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