Question

Action Mopeds manufactures mopeds. The following information pertains to the​ company's normal operations per​ month:

Output units	​15,000 mopeds
Machine−hours	​4,000 hours
Direct manufacturing labour hours	​5,000 hours
Direct manufacturing labour per hour	​$24
Direct materials per unit	​$200
Variable manufacturing overhead costs	​$322,500
Fixed​ costs:	​
Fixed manufacturing overhead costs	​$1,200,000
Marketing and distribution costs	​$1,125,000
Research and development costs	​$900,000

What is the unit cost when establishing a long−run price for​ mopeds?

A. ​$325.48

B. ​$309.50

C. ​$484.50

D. ​$470.00

E. $444.50

Answer 1

Answer
Option E is correct
Direct materials [ 15,000 X $ 200]	$3,000,000
Direct labor [ 5,000 X $ 24 ]	$120,000
Variable manufacturing overhead	$322,500
Fixed manufacturing overhead costs	$1,200,000
Product and process design costs	$1,125,000
Marketing and distribution costs	$900,000
Full costs or total costs	$6,667,500
Full cost base per unit = Full costs / Number of units produced
Full cost base per unit = $ 666750 / 15,000 = $ 444.50