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    Estimating Cost Based on Behavior Patterns

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    The following information provides the amount of cost incurred in May for the cost items indicated. During May 16,000 units of the firm's single product were manufactured.

    Raw materials $83,200
    Factory depreciation expense 81,000
    Direct labor 198,400
    Production supervisor's salary 12,200
    Computer rental expense 8,400
    Maintenance supplies used 1,600

    a) How much cost would you expect to be incurred for each of these items during June when 19,200 units of the product are planned for production?

    b) Calculate the average total cost per unit for the 16,000 units manufactured in May. Explain why this figure would not be useful to a manager interested in predicting the cost of producing 19,200 units in June.

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    Solution Summary

    The attached file contains detailed illustrated instructions for estimating cost based on business behaviour patterns.