Reference no: EM132732106
Question - Seaside Motors 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. Seaside has the following manufacturing costs:
Plant management costs, per year
Cost of leasing equipment, per year
Workers' wages, per Surfer vehicle produced
Direct materials costs: Steel, per Surfer; Tires, 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 $40,000
501-1,000 tires $65,000
more than 1,000 tires $230,000
Seaside currently produces 190 vehicles per month.
Required -
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 graphs? Explain.
3. What is the total manufacturing cost of each vehicle if 65 vehicles are produced each month? 190 vehicles? How do you explain the difference in the manufacturing cost per unit?