The Johnson Furniture Company has the following information available regarding costs at various levels of monthly...
The Johnson Furniture Company has the following information available regarding costs at various levels of monthly production:
|
Production volume (units) |
8,000 Units |
11,000 Units |
|
Direct materials |
$35,000 |
$50,000 |
|
Direct labor |
33,000 |
45,000 |
|
Indirect materials |
10,500 |
15,000 |
|
Supervisors’ salaries |
6,000 |
6,000 |
|
Depreciation on plant and equipment |
5,000 |
5,000 |
|
Maintenance |
16,000 |
22,000 |
|
Utilities |
7,500 |
10,500 |
|
Insurance on plant and equipment |
800 |
800 |
|
Property taxes on plant and equipment |
1,000 |
1,000 |
|
Total |
$114,800 |
$155,300 |
Requirements:
- Develop an equation for total monthly maintenance costs using the high-low method of cost estimation.
- Predict maintenance costs for a monthly production volume of 18,000 units.
Homework Answers
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| Production Volume | Maintenance cost | ||
| High | 8,000 | $ 16,000 | |
| Low | 11,000 | $ 22,000 | |
| Diff | 3,000 | $ 6,000 | |
| Variable Cost | $6,000/3,000 | $ 2 | |
| Equation | |||
| y= | $2x | ||
| For Monthly production of 18,000 units | $2*18,000 units | $ 36,000 | |
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