Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 20

Estimating costs based on behavior patterns The following information provides the amount of cost incurred in May for the cost items indicated. During May 16,000 units of the firm’s single product were manufactured.

Raw materials	$ 83,200
Factory depreciation expense	81,000
Direct labor	198,400
Production supervisor’s salary	12,200
Computer rental expense	8,400
Maintenance supplies used	1,600

Required:

a.How much cost would you expect to be incurred for each of these items during June when 19,200 units of the product are planned for production?

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b. Calculate the average total cost per unit for the 16,000 units manufactured in May. Explain why this figure would not be useful to a manager interested in predicting the cost of producing 19,200 units in June.

Step 1 of 9

By extracting the information: