cost is fixed and how much is variable. The following data are the only records available:
Month Machine-hours Overhead Costs February 1,700 $ 20,500 March 2,800 22,250 April 1,000 19,950 May 2,500 21,500 June 3,500 23,950
Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.
4. Question:
( TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:
Direct materials $ 0.60 Direct manufacturing labor 3.00 Variable manufacturing overhead 1.20 Fixed manufacturing overhead 1.60 Total $ 6.40
Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $ 6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $ 9,000 if Kirkland accepts the offer. In addition, $ 1.00 per unit of fixed manufacturing overhead on the original item would be eliminated.
a. What is the relevant per unit cost for the original part?