Determining-cost behavior project for a company


Assignment:

Cost Behavior Project

Bush incorporated, a manufacturing company reports the following actual costs for the year ended December 31, 2016.

 Account

Classification

 

 

Cost

 

 

 

Direct materials

Direct manufacturing labor

Power

Supervision labor

Materials-handling labor

Maintenance labor

Depreciation

Rent, property taxes, admin

 

All Variable

All Variable

All Variable

20% Variable

50% Variable

40% Variable

All Fixed

All Fixed

 

 

 

 

 

$300,000

225,000

37,500

56,250

60,000

75,000

95,000

100,000

 

 

The company produced 75,000 units in 2016 and the management is estimating the costs for 2017 using the information from 2016. The following additional information is available for 2017.

 








a.Direct materials prices in 2017 are expected to increase by 5% compared with 2016.

b.Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 10% in 2017 compared with 2016.

c.Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change.

d.Depreciation costs, rent, property taxes, and administration costs are expected to increase by 10%.

e.The company expects to manufacture and sell 80,000 units in 2017.

Requirements:

1.Prepare a schedule of variable and fixed cost for each of the costs and total manufacturing cost for 2016 and 2017.

2.Calculate the company's per unit cost for 2016 and 2017. 

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Cost Accounting: Determining-cost behavior project for a company
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