Cost Behavior SmokeCity Inc manufactures barbeque smokers Ba

Cost Behavior SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost $543,000+$1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers: Actual overhead costs for the year were as expected. Required 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year?

Solution

1) Cost drier is :- Number of smokers

2) Total overhead is = 543000+(1.34*20000) = $ 569,800/-

3) total fixed overhead is $ 543,000/-

4) total Variable overhead is = 1.34*20000 = 26,800/-

5) Unit cost is = 569800/20000 = $ 28.49 per unit

6) Unit fixed cost is = 543000/20000 = $ 27.15 per unit

7) Unit Variable cost = 28.49-27.15 = $ 1.34 per unit