Creating and Using a Cost Formula

Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $15,000 on its plant equipment and monthly advertising costs of $2,900 to place advertisements in magazines. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 10,800 grams of materials to manufacture 7,200 flash drives per month. Each gram of material costs $3.00. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $28,800 variable manufacturing overhead resources to produce 7,200 flash drives per month.

In your calculations, round per unit costs to the nearest cent. If required, round final answers (other than per unit costs) to the nearest dollar.

Required:

1. Create a formula for the monthly cost of flash drives for Big Thumbs.

Total cost of flash drives = Fixed cost + ( Variable rate x Number of flash drives)

Total cost of flash drives = __________ $ + (___________$ x Number of flash drives)

2. If the department expects to manufacture 6,000 flash drives next month, what is the expected fixed cost (assume that 6,000 units is within the company's current relevant range)? $______________

What is the total variable cost (assume that 6,000 units is within the company's current relevant range)? $ ________________

What is the total manufacturing cost (i.e., both fixed and variable) (assume that 6,000 units is within the company's current relevant range)?

$ _________________