Question
A garment manufacturing company reviews its material, labor, and overhead costs over six months. Month Units Produced Material Cost Cost per Unit (Material) Labor Cost
A garment manufacturing company reviews its material, labor, and overhead costs over six months.
| Month | Units Produced | Material Cost | Cost per Unit (Material) | Labor Cost | Cost per Unit (Labor) | Overhead Cost | Cost per Unit (Overhead) |
|---|---|---|---|---|---|---|---|
| 1 | 1,200 | $4,800 | $6,000 | $2,400 | |||
| 2 | 2,400 | $9,600 | $12,000 | $4,800 | |||
| 3 | 600 | $2,400 | $3,000 | $1,200 | |||
| 4 | 1,800 | $7,200 | $9,000 | $3,600 | |||
| 5 | 3,000 | $12,000 | $15,000 | $6,000 | |||
| 6 | 900 | $3,600 | $4,500 | $1,800 |
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 planning and inventory management. d. Evaluate the effect of cost behavior on the company’s cost of goods sold. e. Recommend strategies for managing material, labor, and overhead costs.
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Accounting Information Systems
Authors: Marshall B. Romney, Paul J. Steinbart
12th edition
132552620, 978-0132552622
