1. Determination of per Unit Total Costs.

The estimated unit costs for Hoteling Industries, when operating

at a production and sales level of 10,000 units, are as follows:

Cost Item Estimated Unit Cost

Direct materials........................................ $15
Direct labor............................................... 10
Variable factory overhead....................... 8
Fixed factory overhead............................ 5
Variable marketing.................................. 4
Fixed marketing....................................... 3

Required:

(1) Identify the estimated conversion cost per unit.

(2) Identify the estimated prime cost per unit.
(3) Determine the estimated total variable cost per unit.
(4) Compute the total cost that would be incurred during a month with a production level of 10,000 units
and a sales level of 12,000 units.

2. Components of Manufacturing Cost. ANTI KKN Inc. produces video cameras. The direct labor cost of
one camera is $200, and the total manufacturing cost is $650. The overhead cost of one camera is two-
thirds as large as its conversion cost.

Required:

(1) Compute the conversion cost per unit.

(2) Determine the factory overhead cost per unit.
(3) Determine the direct materials cost per unit.

3.A company allocates its variable factory overhead based on direct labor hours. During the past
three months, the actual direct labor hours and the total factory overhead allocated were as
follows:

October November December

Direct labor hours............................. 2,500 3,000 5,000
Total factory overhead allocated......................... $80,000 $75,000 $100,000

Based upon this information, the estimated variable cost per direct labor hour was (high low
method):
A. $.125
B. $12.50
C. $.08
D. $8
E. none of the above

4.For a simple regression-analysis model that is used to allocate factory overhead, an internal
auditor finds that the intersection of the line of best fit for the overhead allocation on the y-
axis is $50,000. The slope of the trend line is .20. The independent variable, factory wages,
amounts to $900,000 for the month. What is the estimated amount of factory overhead to be
allocated for the month?
A. $910,000
B. $950,000
C. $ 50,000
D. $180,000
E. $230,000
5.Variable costs, fixed costs, relevant range EMOH KKN Candies manufactures jaw-breaker
candies in a fully automated process. The machine that produces candies was purchased
recently and can make 4,000 per month. The machine costs $6,000 and is depreciated using
straight line depreciation over ten years assuming zero residual value. Rent for the factory
space and warehouse, and other fixed manufacturing overhead costs total $1,000 per month.

EMOH KKN currently makes and sells 3,000 jaw-breakers per month. EMOH KKN buys just
enough materials each month to make the jaw-breakers it needs to sell. Materials cost 10
cents per jawbreaker.

Next year EMOH KKN expects demand to increase by 100%. At this volume of materials
purchased, it will get a 10% discount on price. Rent and other fixed manufacturing overhead
costs will remain the same.

Required:

1. What is EMOH KKNs current annual relevant range of output?

2. What is the annual fixed manufacturing cost within the relevant range? What is the variable
manufacturing cost?
3. What will EMOH KKNs relevant range of output be next year? How if at all, will fixed and
variable manufacturing costs change next year? Assume the costs and depreciation of second
machine are like the first machine. This will add $600 of depreciation per year.