With the help of your chief financial officer (CFO), you have put together the following preliminary budget figures based on last year's numbers for a planned production and sales level of 4,000 units per month: Building depreciation $200,000/yr. Machine operators $100,000/yr. Management staff $400,000/yr. Direct materials $4,000,000/yr. Other expenses that seem to vary based on production levels $3,000,000/yr. Other expenses that don't seem to vary $1,300,000/yr. Selling price per unit $5,000/unit Utilities: This category is difficult to analyze; a part of it is related to the building's heat and light, whereas a part of it is used in the manufacturing process itself. You have the following data to which you will apply the high-low method: • When there is no production, utility costs are $20,000/month. • When production levels reached 4,000 units/month, utility costs totaled $40,000/month.
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