The Penang Company Has the Following Information Available Regarding Costs

question 64

Essay

The Penang Company has the following information available regarding costs at various levels of monthly production: $\begin{array}{lrr}\text { Froduction volume } &\underline{7,000} &\underline{10,000}\\\\\text { Direct materials } & £ 70,000 & £ 100,000 \\\text { Direct labour } & 56,000 & 80,000 \\\text { Indirect materials } & 21,000 & 30,000 \\\text { Supervisors' sal aries } & 12,000 & 12,000 \\\text { Depreciation on plant and equipment } & 10,000 & 10,000 \\\text { Maintenance } & 32,000 & 44,000 \\\text { Utilities } & 15,000 & 21,000 \\\text { Insurance on plant and equipment } & 1,600 & 1,600 \\\text { Property taxes on plant and equipment } & \underline{2,000} & \underline{2,000} \\\quad \text { Total } & £ 219,600 & £ 300,600\end{array}$

a. Identify each cost as being variable, fixed, or mixed by writing the name of each cost under one of the following headings:
Variable Costs $\quad$ Fixed Costs $\quad$ $\quad$ Mixed Costs
b. Develop an equation for total monthly production costs.
c. Predict total costs for a monthly production volume of 8,000 units.

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Definitions:

McGregor

Refers typically to theories X and Y developed by Douglas McGregor, emphasizing two different management styles where theory X is more authoritative, and theory Y is more participative.