Question
A food processing company reviews its raw material, labor, and packaging costs over four months. Month Units Produced Raw Material Cost Cost per Unit (Material)
| Month | Units Produced | Raw Material Cost | Cost per Unit (Material) | Labor Cost | Cost per Unit (Labor) | Packaging Cost | Cost per Unit (Packaging) |
|---|---|---|---|---|---|---|---|
| 1 | 1,000 | $3,000 | $5,000 | $1,500 | |||
| 2 | 2,000 | $6,000 | $9,000 | $3,000 | |||
| 3 | 500 | $1,500 | $2,500 | $750 | |||
| 4 | 1,500 | $4,500 | $7,000 | $2,250 |
Required: a. Compute the cost per unit for each cost. b. Classify each cost as fixed, variable, or mixed. c. Discuss the impact of these cost behaviors on production efficiency. d. Evaluate the effect of cost behavior on the company’s gross margin. e. Recommend cost management strategies for raw materials, labor, and packaging.
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Accounting Information Systems
Authors: Marshall B. Romney, Paul J. Steinbart
12th edition
132552620, 978-0132552622
