Problem 3-4

Just Burn It! Manufactures blank CDs. The company incurs $22,000 in monthly depreciation costs on its manufacturing equipment as well as monthly advertising costs of $2,000 to place ads in newspapers and on the radio. Each CD requires materials and manufacturing overhead resources. On average the company uses 26,000 pounds of material to manufacture 12,000 CDs per month. Each pound of material costs $2.50. The manufacturing overhead is driven by machine hours and on average the company incurs $30,000 in manufacturing overhead to produce 12,000 CDs per month.

Required:

1. Create a formula for the monthly cost of the CDs for Just Burn It! Round your answers to two decimal places.

Total variable rate per unit = Materials cost per unit + Cost of manufacturing overhead per unit $ = $ per CD + $ per CD

2. If the company plans to manufacture 15,000 CDs next month, what is the expected fixed cost? What is the total variable cost? What is the total cost?

Fixed cost $______ Variable cost $_______ Total cost $________