Question

Cardiv 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	4,000 units	5,000 units
Direct materials	$85.80 per unit	$85.80 per unit
Direct labor	$56.10 per unit	$56.10 per unit
Manufacturing overhead	$73.60 per unit	$62.10 per unit

Using the high-low method to calculate the variable and fixed manufacturing overhead, and to then be added to the direct material and direct labor costs, the best estimate of the total cost to manufacture 4,300 units is closest to:

	A.	$877,200
	B.	$909,400
	C.	$901,925
	D.	$926,650

Answer 1

Total manufacturing cost at 4000 units= 4000*73.60= 294400

Manufacturing overhead at 5000 units= 5000*62.10= 310500

Variable manufacturing overhead per unit = (310500-294400)/(5000-4000) = 16100/1000= $16.10

Fixed overhead = 310500-(5000*16.10) = 310500- 80500= 230000

Total cost to manufacture = direct material+direct labor+ variable manufacturing overhead+ fixed manufacturing overhead

=(4300*85.80)+(4300*56.10)+ (4300*16.10)+ 230000 = 368940+241230+69230+230000

Total cost to manufacture= 909400

So correct answer is B) 909400