Question

Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.

Production volume	10,000 units	12,000 units
Direct materials	$ 614,000	$ 736,800
Direct labor	$ 185,000	$ 222,000
Manufacturing overhead	$ 1,008,300	$ 1,042,500

The best estimate of the total cost to manufacture 10,800 units is closest to

Answer 1

First we need to find out fixed manufacturing overhead and variable manufacturing overhead

Variable manufacturing overhead per unit ($1,042,500 - $1,008,300)/(12,000 - 10,000)	$      17.10
Fixed manufacturing overhead ($1,008,300 - (10,000*$17.10))	$ 837,300

Direct material ($614,000/10,000*10,800)	$     663,120
Direct labor ($185,000/10,000*10,800)	$     199,800
Variable manufacturing overhead (10,800*$17.10)	$     184,680
Fixed manufacturing overhead	$     837,300
total cost to manufacture 10,800 units	$ 1,884,900

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