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Cost Accounting

In: Business and Management

Submitted By naraxu
Words 262
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Solution4: Total and unit cost, decision making

60,000 Tota Manufacturin Costs al ng 50,000 40,000 Variable Costs 30,000 20,000 10,000 10 000 0 0 5,000 Num ber of Flanges 10,000 Total Manufacturing Costs Fixed Costs

Note that the production costs include the $20,000 of fixed manufacturing costs but not the $10,000 of period costs. The variable cost is $1 per flange for materials, and $2 per flange $ p g , $ p g for direct manufacturing labor.
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Solution4: Total and unit cost, decision making

Graham’s Glassworks cannot sell below $8.25 per flange and make a profit; the company will have an operating loss of $3,750.

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Solution4: Total and unit cost, decision making

Graham’s Glassworks can sell at a price below $8.25 per flange and still make a profit. The company earns g p p y operating income of $22,500 at a price of $8.25 per flange.
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Solution4: Total and unit cost, decision making The reason the unit cost decreases significantly is that inventoriable (manufacturing) fixed costs and fixed period (non manufacturing) costs remain the same regardless of the number of g units produced. As Graham s Glassworks produces more units, Graham’s units fixed costs are spread over more units, and cost per unit decreases. p This means that if you use unit costs to make decisions about pricing and which product to pricing, produce, you must be aware that the unit cost only applies to a particular level of output. y pp p p
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