Antique Reproductions Inc Estimates Its Manufacturing Costs
antique Reproductions Inc Estimates Its Manufacturing Costs As Fol
Antique Reproductions, Inc. has provided estimates of its manufacturing costs, including variable and fixed costs, for producing different levels of units. The company estimates variable costs per unit as: direct material at $5.50, direct labor at $2.40, and variable overhead at $1.00. Fixed costs consist of supervisor’s salary at $15,000, production facility depreciation at $7,500, and other production costs totaling $1,400. The task is to estimate the total manufacturing costs for production levels of 9,000, 11,000, and 13,000 units.
Paper For Above instruction
Calculating the manufacturing costs at varying production levels provides essential insights for budgeting, cost management, and decision-making. The breakdown of costs into variable and fixed components allows a straightforward approach to estimating total costs at different production volumes. The estimation process involves calculating the total variable costs for each level and adding the fixed costs, which remain constant regardless of the production volume, thus illustrating the nature and behavior of manufacturing costs relative to activity levels.
Variable Costs Calculation
Given the per-unit variable costs, the total variable costs for each production level are calculated as follows:
- Variable material cost = $5.50 per unit
- Variable labor cost = $2.40 per unit
- Variable overhead = $1.00 per unit
Therefore, the total variable cost per unit is $5.50 + $2.40 + $1.00 = $8.90.
At each level:
- For 9,000 units: 9,000 × $8.90 = $80,100
- For 11,000 units: 11,000 × $8.90 = $97,900
- For 13,000 units: 13,000 × $8.90 = $115,700
Fixed Costs
Fixed manufacturing costs comprise supervisor’s salary, depreciation, and other production costs, totaling:
- Supervisor’s salary: $15,000
- Depreciation: $7,500
- Other production costs: $1,400
Total fixed costs = $15,000 + $7,500 + $1,400 = $23,900.
Total Manufacturing Costs
The manufacturing costs at each production level are found by adding the total fixed costs to the total variable costs:
- For 9,000 units: $80,100 + $23,900 = $104,000
- For 11,000 units: $97,900 + $23,900 = $121,800
- For 13,000 units: $115,700 + $23,900 = $139,600
Conclusion
The estimated manufacturing costs for production levels of 9,000, 11,000, and 13,000 units are $104,000, $121,800, and $139,600, respectively. These estimates facilitate planning and cost control, supporting managerial decisions related to pricing, production volume, and profitability analysis. Understanding the cost behavior helps managers to optimize operations, forecast expenses, and evaluate the financial implications under different production scenarios.
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