- Brell Corporation manufactures umbrellas. The cloth used in one umbrella costs $ 15. The corporation rents a manufacturing factory for a monthly rent of $ 275. Prepare a table showing the Total Fixed Cost, Total Variable cost, Total Cost and Average Fixed Cost, Average Variable Cost, and Average Cost for three different levels of production. (No. of units at three different levels can be chosen by you).
(2 Marks)
Answer: - A supplier sells company B raw materials at $ 10/unit for the first 500 units, $ 9/unit for the second 500 units and at $8.5/unit for more than 1000 units.
Which type of cost behavior you have in this case? Explain with graphical representation.
(1 Mark)
Answer: - Ibrahim Corporation manufactures product A. Following is information for next year’s operations, based on an estimated volume of 40,000 units:
Expected revenues $2,000,000
Unit costs:
Direct materials $ 7
Direct labor 16
Variable overhead 6
Fixed manufacturing overhead 3
Total $32
Other fixed costs:
Administration, marketing, etc. $230,000
Income tax rate 30%
a. What is the breakeven point for next year?
b. What is next year’s projected after-tax income?
c. Chose a target after-tax income. Estimate the number of units that must be sold to reach this target.
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