Kamakis limited, a manufacturing company is concerned with the variation in its total manufacturing costs....
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Accounting
Kamakis limited, a manufacturing company is concerned with the variation in its total manufacturing costs. The production manager has therefore requested you to estimate a predictable cost pattern to be used in future cost prediction.
Based on judgment, the plant manager has classified each manufacturing cost as fixed, variable or partly fixed and partly variable. He has provided you with the following information for the month June 2021 when 10,000 units were produced:
Details
Cost
(Sh.)
Cost behavior
Direct materials
420,000
Variable
Direct labour
150,000
Variable
Depreciation
80,000
Fixed
Telephone
2,000
Fixed
Other utilities
40,000
20% fixed
Supervisors salary
200,000
80% fixed
Equipment repairs
60,000
10% fixed
Indirect materials
4,000
Variable
Factory maintenance
60,000
90% fixed
Required:
Using the accountants analysis method, estimate the fixed cost per month and the variable cost per unit
Based on your answer in (i) above, compute the incremental cost of producing 2,000 units
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