The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.MonthTotal Production CostsLevel of Activity (Units Produced)July$ 230,0003,500August250,0003,750September260,0003,800October220,0003,400November340,0005,800December330,0005,500January200,0002,900February210,0003,300March240,0003,600April380,0005,900May350,0005,600June290,0005,000Required: Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)In view of the department’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.

Answered: The table below shows monthly data…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter2: Basic Managerial Accounting Concepts

Section: Chapter Questions

Problem 38E: Total and Unit Product Cost Martinez Manufacturing Inc. showed the following costs for last month:...

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The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.

Month	Total Production Costs	Level of Activity (Units Produced)
July	$ 230,000	3,500
August	250,000	3,750
September	260,000	3,800
October	220,000	3,400
November	340,000	5,800
December	330,000	5,500
January	200,000	2,900
February	210,000	3,300
March	240,000	3,600
April	380,000	5,900
May	350,000	5,600
June	290,000	5,000

Required:

Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)
In view of the department’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.

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