Hicken Corp. makes new video games. To keep customers happy, they must continually produce new and exciting games. Each year, it makes between 6 and 10 new games that it produces in batches. At the end of each year, the company destroys the master copy of all existing games, so that product designers always come up with new games. The cost of designing the games are product-level costs. The cost of computer chips, plastic and other component materials are unit-level costs. The cost of setting up the production run are batch-level costs. All other costs are facility-level costs. The accounting records indicated the following costs for last year:
Production was for 15,000 units, for 7 new products, produced in 60 batches. For the coming year, costs are expected to increase as follows: the unit-level costs are expected to increase by 8 percent; the batch-level costs by 12 percent; the product-level costs by 10 percent; and the facility-level costs by 5 percent.
Required:
1) What are the costs per unit, per batch, and per product for last year?
2) What is the estimated cost per unit, per batch, and per product for the coming year?
3) What are the estimated facility-level costs for this coming year?
4) If Hicken expects to produce 20,000 units for 9 new products in 80 batches this coming year, what are Hicken's estimated total costs for the year?

Question

Hicken Corp. makes new video games. To keep customers happy, they must continually produce new and exciting games. Each year, it makes between 6 and 10 new games that it produces in batches. At the end of each year, the company destroys the master copy of all existing games, so that product designers always come up with new games. The cost of designing the games are product-level costs. The cost of computer chips, plastic and other component materials are unit-level costs. The cost of setting up the production run are batch-level costs. All other costs are facility-level costs. The accounting records indicated the following costs for last year:
  Production was for 15,000 units, for 7 new products, produced in 60 batches. For the coming year, costs are expected to increase as follows: the unit-level costs are expected to increase by 8 percent; the batch-level costs by 12 percent; the product-level costs by 10 percent; and the facility-level costs by 5 percent.
Required:
1) What are the costs per unit, per batch, and per product for last year?
2) What is the estimated cost per unit, per batch, and per product for the coming year?
3) What are the estimated facility-level costs for this coming year?
4) If Hicken expects to produce 20,000 units for 9 new products in 80 batches this coming year, what are Hicken's estimated total costs for the year?

Quizplus · Accepted Answer

The Answer of Hicken Corp. makes new video games. To keep customers happy, they must continually produce new and exciting games. Each year, it makes between 6 and 10 new games that it produces in batches. At the end of each year, the company destroys the master copy of all existing games, so that product designers always come up with new games. The cost of designing the games are product-level costs. The cost of computer chips, plastic and other component materials are unit-level costs. The cost of setting up the production run are batch-level costs. All other costs are facility-level costs. The accounting records indicated the following costs for last year:
  Production was for 15,000 units, for 7 new products, produced in 60 batches. For the coming year, costs are expected to increase as follows: the unit-level costs are expected to increase by 8 percent; the batch-level costs by 12 percent; the product-level costs by 10 percent; and the facility-level costs by 5 percent.
Required:
1) What are the costs per unit, per batch, and per product for last year?
2) What is the estimated cost per unit, per batch, and per product for the coming year?
3) What are the estimated facility-level costs for this coming year?
4) If Hicken expects to produce 20,000 units for 9 new products in 80 batches this coming year, what are Hicken's estimated total costs for the year?