Cost Accounting

Accounting 347

Cost Behavior Project - Second Project

Fall 2017

Bush incorporated, a manufacturing company reports the following actual costs for the year ended December 31, 2016.

Account	Classification			Cost
Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, admin	All Variable All Variable All Variable 20% Variable 50% Variable 40% Variable All Fixed All Fixed			$300,000 225,000 37,500 56,250 60,000 75,000 95,000 100,000
The company produced 75,000 units in 2016 and the management is estimating the costs for 2017 using the information from 2016. The following additional information is available for 2017.

1. Direct materials prices in 2017 are expected to increase by 5% compared with 2016.

1. Under the terms of the labor contract, direct manufacturing labor wage rates are expected to increase by 10% in 2017 compared with 2016.

1. Power rates and wage rates for supervision, materials handling, and maintenance are not expected to change.

1. Depreciation costs, rent, property taxes, and administration costs are expected to increase by 10%.

1. The company expects to manufacture and sell 80,000 units in 2017.

Requirements:

1. Prepare a schedule of variable and fixed cost for each of the costs and total manufacturing cost for 2016 and 2017.

1. Calculate the company’s per unit cost for 2016 and 2017.