# Problem 3-38 - Variable cost per unit is 6,200/2,200 units...

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Problem 3-38 1)Visual-fit method for the fixed maintenance cost per units produced is 13,000. The variable cost per unit is calculated by selecting another point on the graph. (17,500-13,000)/2000= 2.25. Cost Function = Y=F+VX=13,000 +2.25 * number of units produced. Visual-fit for fixed maintenance cost based on set-up is 5,100. The variable cost per unit is calculated by selecting another point in the graph. (26,000-5,100)/27=774 Cost Function = Y=F+VX=5,100+774+ number of set-ups 2)High Low Method Production Units Maintenance Costs Units Produced High 21,000 3,900 Low 14,800 1,700 Difference 6,200 2,200 The fixed maintenance cost per unit produced is 14,000 and the variable cost per unit is 2.4 per unit

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Unformatted text preview: Variable cost per unit is 6,200/2,200 units = 2.40 Fixed maintenance cost 21,000-(3,900*2.4)=11,640. Cost function=Y=F+VX=11,640+2.40*Number of units produced Set-Up Maintenance Costs Units Produced High 26,000 27.50 Low 15,000 10.30 Difference 11000 17.2 The fixed maintenance cost per set-ups is 8412.92 and the variable cost per unit is 639.53 Variable cost per unit is 11,000/17.2 =639.53 per set-up Fixed maintenance cost is 26000-(27.5*639.53) = 8412.92 Cost function Y=F+VX=8412.92+639.53* number of set-ups 3) The number of set-ups is a better cost driver because the costs are earned during the setting up of the machine rather than during the production phase....
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## This note was uploaded on 06/04/2010 for the course BUSINESS M ACC561 taught by Professor Johnson during the Spring '10 term at University of Phoenix.

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Problem 3-38 - Variable cost per unit is 6,200/2,200 units...

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