Assignment Problem: Creating and Using a Cost Formula
Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $14,200 on its plant equipment. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 13,800 ounces of materials to manufacture 6,900 flash drives per month. Each ounce of material costs $3.00. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $41,400 of variable manufacturing overhead resources to produce 6,900 flash drives per month.
In your calculations, round variable rate per flash drive to the nearest cent. If required, round final answers to the nearest cent.
Required:
1. Create a formula for the monthly cost of flash drives for Big Thumbs.
2. If the department expects to manufacture 6,000 flash drives next month, what is the expected fixed cost (assume that 6,000 units is within the company's current relevant range)?
3. What is the total variable cost (assume that 6,000 units is within the company's current relevant range)?
4. What is the total manufacturing cost (i.e., both fixed and variable) (assume that 6,000 units is within the company's current relevant range)?
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