Question

EZ Riderz Manufacturing currently produces 4,000 bicycles per month. The following per unit data apply for sales to regular customers: Direct materials $125 Direct manufacturing labor 72 Variable manufacturing overhead 12 Fixed manufacturing overhead 22 Total manufacturing costs $231 The plant has capacity for 6,000 bicycles and is considering expanding production to 5,000 bicycles. What is the per unit cost of producing 5,000 bicycles? Do not use commas or dollar signs. Answer in the form XXX.XX

Answer 1

Fixed manufacturing overhead per unit = $22

Current production = 4,000 units

Total Fixed manufacturing overheads = Fixed manufacturing overhead per unit x Current production

= 22 x 4,000

= $88,000

When production is increased from 4,000 units to 5,000 units, Total Fixed manufacturing overheads will not increase.

Fixed manufacturing overhead per unit at production level of 5,000 units = Total Fixed manufacturing overheads/Number of units produced

= 88,000/5,000

= $17.6

Direct materials per unit = $125

Direct manufacturing labor per unit = $72

Variable manufacturing overhead per unit = $12

Total manufacturing costs per unit = Direct materials per unit + Direct manufacturing labor per unit + Variable manufacturing overhead per unit + Fixed manufacturing overhead per unit

= 125 + 72 + 12 + 17.6

= $226.60

Per unit cost of producing 5,000 bicycles = 226.60