Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $15,000

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Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $15,000 on its plant equipment and monthly advertising costs of $3,000 to place advertisements in magazines. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 280,000 grams of materials to manufacture 5,000 flash drives per month. Each gram of material costs $0.10. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $22,500 of manufacturing overhead resources to produce 5,000 flash drives per month.


Required:
1. Create a formula for the monthly cost of flash drives for Big Thumbs.
2. If the department expects to manufacture 6,000 flash drives next month, what is the expected fixed cost (assume that 6,000 units is within the company's current relevant range)? Total variable cost? Total manufacturing cost (i.e., both fixed and variable)?

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Cornerstones of Managerial Accounting

ISBN: 978-0176721237

3rd Canadian edition

Authors: Maryanne Mowen, Don Hanson, Dan Heitger, David McConomy, Bradley Witt, Jeffrey Pittman

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