Mimi's Fixtures manufactures kitchen tiles in one plant, which has a practical capacity of 30,000 tiles. The variable cost of the tile is $18.00 per unit, and the fixed costs of the plant are $600,000 annually. Current annual demand is 25,000 tiles. Mimi bought the current plant because she expected that demand for the tiles would grow once her reputation was established. Required:

A. What cost per tile should the cost system report? $38B. What is the cost of excess capacity? C. How would your answers to requirements (a) and (b) change if the smallest tile manufacturing plant that one could build (owing to technology) was able to produce 30,000 tiles?

Question

Chad Barnes

Business

5 December, 16:06

Mimi's Fixtures manufactures kitchen tiles in one plant, which has a practical capacity of 30,000 tiles. The variable cost of the tile is $18.00 per unit, and the fixed costs of the plant are $600,000 annually. Current annual demand is 25,000 tiles. Mimi bought the current plant because she expected that demand for the tiles would grow once her reputation was established. Required:

A. What cost per tile should the cost system report? $38B. What is the cost of excess capacity? C. How would your answers to requirements (a) and (b) change if the smallest tile manufacturing plant that one could build (owing to technology) was able to produce 30,000 tiles?

+5

Answers (1)

Know the Answer?

Jesse House · Answer 1

Answer:a. Calculation of Cost per tile as per the cost system report Cost per tile as per the cost system report = (Fixed cost of the plant/Annual ...