$275 Account Analysis to Determine Cost Behavior Darnell Poston, owner of Poston Manufacturing, Inc., wants to determine the cost behavior of labor and overhead. Darnell pays his workers a salary: during busy times, everyone works to get the orders out. Temps (temporary workers hired through an agency) may be hired to pack and prepare completed orders for shipment. During slower times, Darnell catches up on bookkeeping and administrative tasks while the salaried workers do preventive maintenance, clean the lines and building, etc. Temps are not hired during slow times. Darnell found that workers' salaries, temp agency payments, rentals, utilities, and plant and equipment depreciation are the largest dollar accounts. He believes that workers' salaries and plant and equipment depreciation are fixed, temp agency payments are associated with the number of orders (since temp workers are used to pack and prepare completed orders for shipment), and electricity is associated with the number of machine hours. When the number of different parts stored by Poston exceeds the space in the materials storeroom, Darnell rents nearby warehouse space. He can rent as much or as little space as he wants on a month- to-month basis. Therefore, he believes warehouse rental payments are variable with the number of parts purchased and stored. The account balances for the past six months as well as the six-month total are as follows: Temp Plant & Workers' Agency Warehouse Equipment Salaries Payments Rental Electricity Depreciation January $7,200 $0 $150 $2,200 February 7,200 540 350 385 2,200 March 7,200 1,100 325 655 2,200 April 7,200 1,350 340 695 2,200 May 7,200 1,750 335 725 2,200 June 7,200 1,500 200 675 2,200 Total $43,200 $6,240 $1,700 $3,410 $13,200 Information on number of machine hours, orders, and parts for the six-month period follows: Machine Number of Number of Hours Orders Parts January 2,000 10 200 February 3,100 40 600 March 5,800 350 SSO April 6,200 400 580 May 6,500 510 570 June 6,000 410 300 Total 29,600 1,720 2,800 Required: 1. Calculate the monthly average account balance for each account. When required, round your answers to the nearest dollar and use your rounded answers in all subsequent computations. Average workers' salaries Average temp agency payment Average warehouse rental $ Average electricity $ Average depreciation Calculate the average monthly amount for each of the three drivers. When required, round your answers to the nearest whole number Average machine hours Average number of orders Average number of parts 2. Calculate fixed monthly cost and the variable rates for temp agency payments, warehouse rent, and electricity It required, round your answers to the nearest cent and use the rounded answers in subsequent computations Average fixed monthly cost Variable rate for temp agency per order Variable rate for warehouse per part rental JU! 2. Calculate fixed monthly cost and the variable rates for temp agency payments, warehouse rent, and electricity. If required, round your answers to the nearest cent and use the rounded answers in subsequent computations, Average fixed monthly cost $ Variable rate for temp agency $ per order Variable rate for warehouse $ per part rental per machine Variable rate for electricity hour Express the results in the form of an equation for total cost. Monthly (machine cost (orders) (parts) hours) 3. In July, Darnell predicts there will be 420 orders, 250 parts, and 5,900 machine hours. What is the total labor and overhead cost for July? Round interim computations to 1 decimal place and round final answer to the nearest dollar 4. What if Darnell buys a new machine in July for $24,000? The machine is expected to last 10 years and will have no salvage value at the end of that time. What part of the cost equation will be affected? How will this part of the cost equation be affected? What is the new expected cost in July? When required, round your answer to the nearest dollar