Problem
Spirit Company produces baseball caps. The company incurred the following costs to produce 12,000 caps last month:
Cardboard for the brims $4,800
Cloth 12,000
Plastic for headbands 6,000
Straight-line depreciation 7,200
Supervisor's salaries 19,200
Utilities 3,600
Total 52,800
Requirements:
a. What did each cap component cost on a per-unit basis?
b. What is the probable type of behavior that each of the costs exhibits?
c. The company expects to produce 10,000 caps this month. Would you expect each type of cost to increase or decrease? Why? Can the total cost of 10,000 caps be determined? Explain.