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Company XYZ produced 1,000 units of product A. At this level, the variable manufacturing costs were...

Company XYZ produced 1,000 units of product A. At this level, the variable manufacturing costs were OMR600,000 and the variable selling and administrative costs were OMR110,000. Furthermore, the total fixed cost was OMR140,000. Assuming the company increased the production level to 1,050 units, what would be the increase in total manufacturing costs? Select one:

a. None of the given answers

b. OMR35,500

c. OMR42,500

d. OMR30,000

e. OMR37,000

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Homework Answers

Answer #1

Variable manufacturing cost for 1000 units = OMR 600,000

Variable manufacturing cost per unit = 600,000/1000

= OMR 600

When output is increased, only variable manufacturing cost will increase. Fixed manufacturing cost will not increase due to increase in output.

Increase in output = 1,050-1,000

= 50 units

Increase in variable manufacturing costs = Increase in output x Variable manufacturing cost per unit

= 50 x 600

= OMR 30,000

Total manufacturing cost will increase by OMR 30,000

Correct option is d.

Kindly comment if you need further assistance.

Thanks‼!

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