Answer:
South Charleston Plant of Ravinia, Inc.
1. Cost behavior formula:
Forklift depreciation = $1,600 + $0q
Indirect labor = $43,000 + $6.20q
Fuel and oil for forklift = $3,550 + $0.71 (q - 5,000)
2. Cost of each item for an activity output level of 8,000 moves:
Forklift depreciation = $1,600
Indirect labor = $92,600
Fuel and oil for forklift = $5,680
3. Total cost formula = $48,150 + $6.47q
Materials handling cost = $99,880
Explanation:
a) Data and Calculations:
Resource Number of Moves Total Cost
Forklift depreciation:
Low 5,000 $1,600
High 15,000 1,600
Indirect labor:
Low 5,000 $74,000
High 15,000 136,000
Fuel and oil for forklift:
Low 5,000 $3,550
High 15,000 10,650
Cost behavior formula for each resource:
Forklift depreciation:
Low 5,000 $1,600
High 15,000 1,600
Difference 10,000 $0
Variable cost per unit = $0 ($0/10,000)
Fixed cost = $1,600
Cost behavior formula = $1,600 + $0q
Indirect labor:
Low 5,000 $74,000
High 15,000 136,000
Difference 10,000 62,000
Variable cost per unit = $6.20 ($62,000/10,000)
Fixed cost = $43,000 ($74,000 - ($6.20*5,000))
Cost behavior formula = $43,000 + $6.20q
Fuel and oil for forklift:
Low 5,000 $3,550
High 15,000 10,650
Difference 10,000 $7,100
Variable cost per unit = $0.71 ($7,100/10,000)
Fixed cost = $3,550 ($3,0 - ($0.71 * (15,000 - 5,000))
Step cost
Cost behavior formula = $3,550 + $0.71 (q - 5,000)
Forklift depreciation = $1,600 + $0 * 8,000 = $1,600
Indirect labor = $43,000 + $6.20 * 8,000 = $92,600
Fuel and oil for forklift = $3,550 + $0.71 (8,000 - 5,000) = $5,680
Total cost formula: Fixed + Variable
Forklift depreciation = $1,600 + $0 * 8,000 = $1,600
Indirect labor = $43,000 + $6.20 * 8,000 = $92,600
Fuel and oil for forklift = $3,550 + $0.71 (8,000 - 5,000) = $5,680
$48,150 + $51,730 = $99,880
= $48,150 + $6.47q ($51,730/8,000)
Materials handling cost = ($1600 + $43000) + ($6.20 + $0.71) X
= $44600 + $6.91 X
Y = $44600 + ($6.91 x 8000)
= $44600 + $55280
= $99880
