question 4 Cost structure estimation mountProed or varlable

question 4: Cost structure estimation mountProed or varlable? Cost account direct labor direct materials depreciation rent administrative staff salaries $6,000 $6,000 $9,000 $7,000 $6,000 OF OV OF OV OF OV OF OV OF OV Production volume was 200 units. a) Which cost structure estimation method should we use? O account classification method O high-low method b) Classify each cost account above as fixed or variable. Enter your answers in the table above. c) Estimate the cost structure parameters: total FC=$ unit VC- $ Write down the total cost equation: (e.g., if TC-500+2\"volume, enter 500 in the first box and 2 in the second box) d) Predict the total cost of producing 250 units: * volume

Solution

Cost account Amount F or V Direct labor 6000 V Direct materials 6000 V Depreciation 9000 F Rent 7000 F Administrative staff salaries 6000 F Cost structure estimation method Account classification method Cost structure parameters Total fixed cost 22000 Total variable cost 60 Cost equation TC= 22000+ 60*volume Total cost of 250 units TC= 37000 =22000+60*250