What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month?
Q1.
Seaside Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted
storage racks.
Seaside has the following manufacturing costs:
Seaside currently produces 210 vehicles per month.
Requirements
1.What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month?
2.Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your
graphs? Explain.
3What is the total manufacturing cost of each vehicle if 70
vehicles are produced each month? 195
vehicles? How do you explain the difference in the manufacturing cost per unit?
Q2. Sweet tooth Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 4, 500
per month. The machine costs $ 8, 500 and is depreciated using straight line depreciation over 10 years assuming zero residual value. Rent for the factory space and
warehouse and other fixed manufacturing overhead costs total $ 1, 500 per month. Sweet tooth currently makes and sells 3,500 jaw-breakers per month. Sweet tooth buys
just enough materials each month to make the jaw-breakers it needs to sell. Materials cost 10 cents per jaw-breaker. Next year Sweet tooth
expects demand to increase by 100%. At this volume of materials purchased, it will get a 10% discount on price. Rent and other fixed manufacturing overhead costs will
remain the same.
