Beacher Motor specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Beacher has the following manufacturing costs:
Plant management costs, $1,200,000 per year
Cost of leasing equipment, $1,800,000 per year
Workers' wages, $4700 per Surfer vehicle produced
Direct materials costs: Steel, $1,500 per Surfer; Tires, $125 per tire, each Surfer takes 5 tires (one spare).
City license, which is charged monthly based on the number of tires used in production:
0-500 tires $50,000
501-1,000 tires $74,500
more than 1,000 tires $200,000
Beacher currently produces 110 vehicles per month. (SHOW ALL YOUR WORK for the following)
1) What is the variable manufacturing cost per vehicle? What is the fixed manufacturing cost per month?
2) Plot a graph for the variable manufacturing costs and a second for the fixed manufacturing costs per month. How does the concept of relevant range relate to your graph? Explain.
3) What is the total manufacturing cost of each vehicle if 100 vehicles are produced each month? 225 vehicles? How do you explain the difference in the manufacturing cost per unit?