Question

Daysmy41 Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. Production volume 7,000 units 8,000 units Direct materials $ 82.90 per unit $ 82.90 per unit Direct labor $ 58.20 per unit $ 58.20 per unit Manufacturing overhead $ 74.20 per unit $ 69.20 per unit The best estimate of the total cost to manufacture 7,400 units is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

>> Manufacturing cost is semi variable item.

>> Total Manufacturing cost at 7000 Units = 7000 * $ 74.2 = $ 519,400.

>> Total Manufacturing cost at 8000 Units = 8000 * $ 69.2 = $ 553,600.

>> Variable manufacturing cost = ( $ 553,600 - $ 519,400 ) / ( 8000 - 7000 ) = $ 34.2.

>> Fixed Manufacturing cost = $ 519,400 - ( 7000 * $ 34.2 )

>> Fixed Manufacturing cost = $ 280,000.

>> Total variable cost = $ 82.9 + $ 58.20 + $ 34.2

>> Total variable cost = $ 175.30

>> Total cost at 7400 Units = Variable cost + Fixed cost

>> Total cost at 7400 Units = ( 7400 * $ 175.3 ) + $ 280,000

>> Total cost at 7400 Units = $ 1,577,220.