Costs that are not tied to changes in production level across the relevant range are known as "fixed costs." These costs are indirectly assigned to units of production, and many factory overhead costs fall into this category. The business must ensure that all costs are assigned to the product. By assigning fixed costs, business costs are not directly tied to any one unit of production. This is important because it affects both pricing and profits. A machine on the production line at an auto company requires a periodic retooling that costs $150,000 annually. Calculate the total fixed cost per unit at different levels along the relevant range of 100,000 to 400,000 units. If required, round the per unit amounts to two decimal places. Number of Units Produced Fixed Cost per unit 100,000 $ 200,000 $ 300,000 $ 400,000 $ What is the activity base for each business and its associated costs? The first one is completed as an example. Type of Business Cost Activity Base Automotive Direct materials Number of cars produced Hotel Housekeeper wages a. amount of electricity b. number of guests c. number of rooms Software Developer wages a. lines of code required b. materials purchased c. number of training classes Bank Teller wages a. hours of operation b. number of customer transaction c. square footage of bank

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter15: Lean Accounting And Productivity Measurement

Section: Chapter Questions

Problem 18E: Lean manufacturing uses value streams to produce a family of products that require the same...

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APPLY THE CONCEPTS: Determine the total fixed cost

Costs that are not tied to changes in production level across the relevant range are known as "fixed costs." These costs are indirectly assigned to units of production, and many factory overhead costs fall into this category. The business must ensure that all costs are assigned to the product. By assigning fixed costs, business costs are not directly tied to any one unit of production. This is important because it affects both pricing and profits.

A machine on the production line at an auto company requires a periodic retooling that costs $150,000 annually. Calculate the total fixed cost per unit at different levels along the relevant range of 100,000 to 400,000 units. If required, round the per unit amounts to two decimal places.

Number of Units Produced	Fixed Cost per unit
100,000	$
200,000	$
300,000	$
400,000	$

What is the activity base for each business and its associated costs? The first one is completed as an example.

Type of Business	Cost	Activity Base
Automotive	Direct materials	Number of cars produced
Hotel	Housekeeper wages	a. amount of electricity b. number of guests c. number of rooms
Software	Developer wages	a. lines of code required b. materials purchased c. number of training classes
Bank	Teller wages	a. hours of operation b. number of customer transaction c. square footage of bank

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