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Exercise 2-5 Fixed and Variable Costs [LO5] Mike's Radiator Services specializes in the repair and replacement of radiators for passenger vehicles. Variable and fixed costs
Exercise 2-5 Fixed and Variable Costs [LO5] Mike's Radiator Services specializes in the repair and replacement of radiators for passenger vehicles. Variable and fixed costs related to Installation activities for the most recent month (January) are listed below. Item Number of radiators replaced Variable expenses Direct materials (new radiators) Indirect materials 190 $95,000 Direct labour (2 hours per installation) 9,500 950 Installation supervisor's wages $20,672 2,584 2,014 Fixed expenses Equipment depreciation Insurance and utilities for garage Required: 1. Calculate the per unit amounts for each of the variable expense and fixed expense items in January. Item Variable expenses: Direct materials (new radiators) Direct labour (2 hours per installation) Indirect materials Fixed expenses: Installation supervisor's wages Equipment depreciation Insurance and utilities for garage Per Unit 2. Mike expects that 152 radiators will be Installed in February and that this level of activity is within the relevant range for all variable and fixed expenses. a & b-1. Calculate the total expense and per unit amounts for each of the variable and fixed cost Items above. (Round "per unit" answers to 2 decimal places.) Variable expenses: Direct materials (new radiators) Direct labour (2 hours per installation) Indirect materials Fixed expenses: Installation supervisor's wages Equipment depreciation Insurance and utilities for garage February (Total Cost) February Par Unit b-2. Explain any differences in the per unit amounts between January and February. 3. Which, if any, of the costs shown above would be considered sunk costs? Why
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