Kandy Companys material handling costs and kilos of material

Kandy Company\'s material handling costs and kilos of materials handled for two recent months appear below.

Month Kilos of Materials Handled Materials Handling Costs

January 4,000 $3,120

February 6,000 $4,460

March 4,800 $3,500

April 3,800 $3,040

May 3,600 $2,900

Compute materials handling costs for 5,400 kilos.

June 4,200 $3,200

Solution

Variable cost = $1560/2400 = $0.65

Fixed cost = $4460 - (6000 x $0.65) = $4460 - $3900 = $560

Materials handling cost for 5400 kilos = $560 + (5400 x $0.65) = $560 + $3510 = $4070