Determining cost relationships Midstate Containers Inc. manufactures cans for the canned food industry. The operations manager of a can manufacturing operation wants to conduct a cost study investigating the relationship of tin content in the material (can stock) to the energy cost for enameling the cans. The enameling was necessary to prepare the cans for labeling. A higher percentage of tin content in the can stock increases the cost of material. The operations manager believed that a higher tin content in the can stock would reduce the amount of energy used in enameling. During the analysis period, the amount of tin content in the steel can stock was increased for every month, from April to September. The following operating reports were available from the controller:     April     May     June     July     August     September Materials   $14,000     $34,800     $33,000     $21,700     $28,800     $33,000 Energy   13,000     28,800     24,200     14,000     17,100     16,000 Total cost   $27,000     $63,600     $57,200     $35,700     $45,900     $49,000 Units produced   ÷ 50,000     ÷ 120,000     ÷ 110,000     ÷ 70,000     ÷ 90,000     ÷ 100,000 Cost per unit   $0.54     $0.53     $0.52     $0.51     $0.51     $0.49 Differences in materials unit costs were entirely related to the amount of tin content. In addition, inventory changes are negligible and are ignored in the analysis. Calculate the total cost per unit for each month. Round your answers to the nearest cent.     Total Cost per Unit April   $fill in the blank 1 May   $fill in the blank 2 June   $fill in the blank 3 July   $fill in the blank 4 August   $fill in the blank 5 September   $fill in the blank 6 Interpret your results. The calculations reveals that the tin content and energy costs are   related. That is, as the materials cost increased due to higher tin content, the energy costs   by more. Thus, the recommendation should be to   raw can stock with the tin content at the $0.33-per-unit level(September level). This is the material that   the total production cost for this set of data. Additional data could be used to determine the optimal tin content, or the point where energy cost savings fail to overcome additional material costs.

Determining cost relationships

Midstate Containers Inc. manufactures cans for the canned food industry. The operations manager of a can manufacturing operation wants to conduct a cost study investigating the relationship of tin content in the material (can stock) to the energy cost for enameling the cans. The enameling was necessary to prepare the cans for labeling. A higher percentage of tin content in the can stock increases the cost of material. The operations manager believed that a higher tin content in the can stock would reduce the amount of energy used in enameling. During the analysis period, the amount of tin content in the steel can stock was increased for every month, from April to September. The following operating reports were available from the controller:

    April     May     June     July     August     September
Materials   $14,000     $34,800     $33,000     $21,700     $28,800     $33,000
Energy   13,000     28,800     24,200     14,000     17,100     16,000
Total cost   $27,000     $63,600     $57,200     $35,700     $45,900     $49,000
Units produced   ÷ 50,000     ÷ 120,000     ÷ 110,000     ÷ 70,000     ÷ 90,000     ÷ 100,000
Cost per unit   $0.54     $0.53     $0.52     $0.51     $0.51     $0.49

Differences in materials unit costs were entirely related to the amount of tin content. In addition, inventory changes are negligible and are ignored in the analysis.

Calculate the total cost per unit for each month. Round your answers to the nearest cent.

    Total Cost
per Unit
April   $fill in the blank 1
May   $fill in the blank 2
June   $fill in the blank 3
July   $fill in the blank 4
August   $fill in the blank 5
September   $fill in the blank 6

Interpret your results.

The calculations reveals that the tin content and energy costs are   related. That is, as the materials cost increased due to higher tin content, the energy costs   by more. Thus, the recommendation should be to   raw can stock with the tin content at the $0.33-per-unit level(September level). This is the material that   the total production cost for this set of data. Additional data could be used to determine the optimal tin content, or the point where energy cost savings fail to overcome additional material costs.

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