Chapter 3 Question Fixed Rite Auto is an auto-body repair shop in Calgary. The monthly total overhead costs at various levels of activity are presented below: Month Total Overhead Costs Total Hours worked January February March April $ 229,000 $ 220,000 $ 245,700 $ 238,000 5,700 5,400 6,250 6,000 Assume that the total overhead cost consists of shop-parts, supervisory salaries and utilities. The breakdown of these costs at the 6,250 hours level (month of March) is as follows: Cost Cost Type Variable Fixed Shop-parts Salaries Utilities Total March overhead cost Cost $ $ 112,500 50,000 83,200 $ 245,700 Mixed REQUIRED: Round per unit calculations to 4 decimal places 1. Calculate the following: (4 marks) (i) the per hour cost of the shop-parts (ii) the cost of the shop-parts, salaries, and utilities in each of the months of January, February and April. 2. The company expects that 6,400 hours will be worked in May. For the month of May calculate the total cost of: (0) Salaries (1 marks) (ii) Shop-parts (2 marks) (iii) Utilities (use the least squares method using your calculator or MS Excel) (6 marks) 3 Using the information in the question and the items calculated above, prepare a formula in the format Y = a + bx that represents the total overhead costs. Show the components (shop-parts, salaries and utilities) that make up the total equation. (5 marks) 4. Briefly explain to the owner of Fixed Rite Auto, using relevant examples, the difference between a variable cost and a mixed cost. (2 marks) Chapter 3 Question Fixed Rite Auto is an auto-body repair shop in Calgary. The monthly total overhead costs at various levels of activity are presented below: Month Total Overhead Costs Total Hours worked January February March April $ 229,000 $ 220,000 $ 245,700 $ 238,000 5,700 5,400 6,250 6,000 Assume that the total overhead cost consists of shop-parts, supervisory salaries and utilities. The breakdown of these costs at the 6,250 hours level (month of March) is as follows: Cost Cost Type Variable Fixed Shop-parts Salaries Utilities Total March overhead cost Cost $ $ 112,500 50,000 83,200 $ 245,700 Mixed REQUIRED: Round per unit calculations to 4 decimal places 1. Calculate the following: (4 marks) (i) the per hour cost of the shop-parts (ii) the cost of the shop-parts, salaries, and utilities in each of the months of January, February and April. 2. The company expects that 6,400 hours will be worked in May. For the month of May calculate the total cost of: (0) Salaries (1 marks) (ii) Shop-parts (2 marks) (iii) Utilities (use the least squares method using your calculator or MS Excel) (6 marks) 3 Using the information in the question and the items calculated above, prepare a formula in the format Y = a + bx that represents the total overhead costs. Show the components (shop-parts, salaries and utilities) that make up the total equation. (5 marks) 4. Briefly explain to the owner of Fixed Rite Auto, using relevant examples, the difference between a variable cost and a mixed cost. (2 marks)
