Question

Creating and using a Cost Formula Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $15,000 on its plant equipment. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 10,000 ounces of materials to manufacture 5,000 flash drives per month. Each ounce of material costs $3.00. In addition, manufacturing overhead resources are driven by machine hours. On average, the company mcurs $22,500 of variable manufacturing overhead resources to produce 5,000 flash drives per month. In your calculations, round variable rate per flash drive to the nearest centi Required: 1. Create a formula for the monthly cost of flash drives for Big Thumbs Total cost of flash drives = Number olash drives Total cost of flash drives = + (S x Number of flash drives 2. If the department expects to manufacture 6,000 flash drives next month, what is the expected fixed cost assume that 6,000 units is within the company's current relevant range) What is the total variable cost (assume that 6,000 units is within the company's current relevant angela What is the total manufacturing cost (1.e., both fixed and variable) (assume that 6,000 units is within the co n tent relevant range) Check My Work Next Save and Ext Submit Assignment for Grading 4 0 5532 GA

Answer 1

Material cost per unit = 10,000/5,000*$3 = $6

Variable manufacturing overhead = $22,500/5,000 = $4.5

Variable rate per unit = $10.5

1.

Total cost of flash drives = Fixed cost + Variable rate * Number of flash drives

Total cost of flash drives = $15,000 + $10.5 * 5,000 = $67,500

2.

Expected fixed cost = $15,000

3.

Total variable cost = $10.5*6,000 = $63,000

4.

Total manufacturing costs = $15,000 + 63,000 = $78,000