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Sam, the cost accountant for Lockers Unlimited, has gathered the following data regarding manufacturing costs: Variable manufacturing costs are driven by kilograms of raw materials
Sam, the cost accountant for Lockers Unlimited, has gathered the following data regarding manufacturing costs: Variable manufacturing costs are driven by kilograms of raw materials used, at $15.10 per kg used. Fixed costs for a given month are $180,000. Raw materials used are usually between 200,000 kg and 250,000 kg, depending on the month. What formulas best represents the linear cost function for Lockers Unlimited?
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Absolutely Heres the linear cost function that best represents Lockers Unlimiteds manufacturing costs Total Cost Variable Cost Fixed Cost where Variable Cost This is the cost that changes proportionally with the amount of raw materials used Fixed Cost This is the cost that remains constant regardless of the production volume within a relevant range between 200000 kg and 250000 kg in this case Expressing Variable Cost We are given that the variable cost per kilogram of raw materials is 1510 Lets denote the kilograms of raw materials used as X Therefore the variable cost can be expressed as Variable Cost 1510 X Putting it all together By substituting the expressions for variable and fixed costs we get the linear cost function for Lockers Unlimited Total Cost 1510 X 180000 This equation represents the total manufacturing cost ...
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Managerial Accounting
Authors: Ray Garrison, Theresa Libby, Alan Webb
9th canadian edition
1259269477, 978-1259269479, 978-1259024900
