1. Mwambashi manganese processing plant was designed and constructed to produce at least 1 million kg of manganese per year. However, for unknown reasons the plant has only been able to produce 50% of the design capacity annually. At full production, all fixed and invariant charges amount to 35% of the total annual product cost while the cost of raw materials and other production costs that vary with the production output of the plant amount to 40% of total product cost. On the other hand, 25% of the total product cost represents variable overhead and miscellaneous expenses which are directly proportional to the production rate raised to the power 1.2. What will be the total cost per kg of product if the plant is producing at 50% of full capacity. Also, determine the percent change in total cost per kg of product at full capacity and half capacity production.

1. Mwambashi manganese processing plant was designed and constructed to produce at least 1 million kg of manganese per year. However, for unknown reasons the plant has only been able to produce 50% of the design capacity annually. At full production, all fixed and invariant charges amount to 35% of the total annual product cost while the cost of raw materials and other production costs that vary with the production output of the plant amount to 40% of total product cost. On the other hand, 25% of the total product cost represents variable overhead and miscellaneous expenses which are directly proportional to the production rate raised to the power 1.2. What will be the total cost per kg of product if the plant is producing at 50% of full capacity. Also, determine the percent change in total cost per kg of product at full capacity and half capacity production.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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