Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 5

Cost Behavior and Forecasting

Ramirez Company manufactured 60,000 units of product last year and identified the following costs associated with the manufacturing activity:

Variable costs:
Direct materials used	$ 1,020,000
Direct labor	2,240,000
Indirect materials and supplies	240,000
Power to run plant equipment	280,000
Fixed costs:
Supervisory salaries	930,000
Plant utilities (other than power to run plant equipment)	220,000
Depreciation on plant and equipment (straight-line, time basis)	135,000
Property taxes on building	195,000

Required

Unit variable costs and total fixed costs are expected to remain unchanged next year. Calculate the unit cost and the total cost if 51,000 units are produced next year.

Step 1 of 5

Variable costs

Variable costs are the costs which varies with the output of quantity produced that is if the number of units produced increases then the variable cost would also increase.