Question

X Company wants to estimate total costs (overhead plus administrative) in March, when production is expected to be 1,500 units. It analyzed January costs to determine the parameters of the overhead and administrative cost functions. January production was 1,000 units and costs were as follows: Total overhead costs Total fixed overhead costs Total administrative costs Total variable administrative costs $62,000 27,900 35,000 9,800 What is X Company's estimate of total costs in March [round unit costs to two decimal places)?

Answer 1

Total overhead costs = $62,000

Total fixed overhead costs = $27,900

Total variable overhead = Total overhead costs - Total fixed overhead costs

= 62,000 - 27,900

= $34,100

Variable overhead cost per unit = Total variable overhead/ Number of units

= 34,100/1,000

= $34.1

Total administrative costs = $35,000
Total variable administrative costs = $9,800

Total fixed administrative cost = Total administrative costs -Total variable administrative costs

= 35,000-9,800

= $25,200

Total variable administrative cost per unit = 9,800/1,000
= $9.8

Calculation of Total Cost in March
Total variable cost (34.1 x 1,500)	51,150
Total fixed cost	27,900
Total variable administrative cost (9.8 x 1,500)	14,700
Total fixed administrative cost	25,200
Total Cost	$118,950

X company's estimate of total costs in March is $118,950.

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