Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Anand Limited manufactures drones for industrial use. Most of their costs are either true variable costs or fixed costs. However, an account analysis shows the

Anand Limited manufactures drones for industrial use. Most of their costs are either true variable costs or fixed costs. However, an account analysis shows the following items are mixed costs.
Account
Analysis
2019 Total Cost
Production supervision
80% fixed
$150,000
Utilities
20% fixed
$ 60,000
Sales staff wages*
70% fixed
$200,000
Quality control inspections**
90% fixed
$
40,000
*The 30% variable portion relates to sales commissions based on total sales.
**50% of manufactured units are inspected each year.
In 2019 Anand Limited produced and sold 500 drones at $2,000 each.
Required:
Page 79
1. Management expects to sell 700 drones in 2020, does not anticipate any cost increases due to inflation, and plans to maintain the sales price of $2,000 per drone. Estimate total costs for each of the mixed cost items above. Be sure to show the variable and fixed components of the total cost.
2. In addition to the facts per requirement 1, assuming that direct material costs are $500 per unit and direct labour costs are $250 per unit, calculate the expected contribution margin for 2020 based on sales of 700 drones.Anand Limited manufactures drones for industrial use. Most of their costs are either true variable costs or fixed costs. However, an account analysis shows the following items are mixed costs.
Account
Analysis
2019 Total Cost
Production supervision
80% fixed
$150,000
Utilities
20% fixed
$ 60,000
Sales staff wages*
70% fixed
$200,000
Quality control inspections**
90% fixed
$
40,000
*The 30% variable portion relates to sales commissions based on total sales.
**50% of manufactured units are inspected each year.
In 2019 Anand Limited produced and sold 500 drones at $2,000 each.
Required:
Page 79
1. Management expects to sell 700 drones in 2020, does not anticipate any cost increases due to inflation, and plans to maintain the sales price of $2,000 per drone. Estimate total costs for each of the mixed cost items above. Be sure to show the variable and fixed components of the total cost.
2. In addition to the facts per requirement 1, assuming that direct material costs are $500 per unit and direct labour costs are $250 per unit, calculate the expected contribution margin for 2020 based on sales of 700 drones.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting An Introduction

Authors: Pauline Weetman

7th Edition

1292086696, 978-1292086699

More Books

Students also viewed these Accounting questions

Question

Briefly define Galens constitutional types.

Answered: 1 week ago