Answer the following questions using the information below:
Axle and Wheel Manufacturing currently produces 1000 axles per month.The following per unit data apply for sales to regular customers:
$\begin{array}{lr}
\text { Direct materials } & \$ 30 \
\text { Direct manufacturing labour } & 5 \
\text { Variable manufacturing overhead } & 10 \
\text { Fixed manufacturing overhead } & \underline{40} \
{\text { Total manufacturing costs }} & \$ 85
\end{array}$
-What is the per unit cost when producing 1500 axles?
A)$71.67
B)$170.00
C)$85.00
D)$107.50

Question

Answer the following questions using the information below:
Axle and Wheel Manufacturing currently produces 1000 axles per month.The following per unit data apply for sales to regular customers:
 $\begin{array}{lr}
\text { Direct materials } & \$ 30 \
\text { Direct manufacturing labour } & 5 \
\text { Variable manufacturing overhead } & 10 \
\text { Fixed manufacturing overhead } & \underline{40} \
{\text { Total manufacturing costs }} & \$ 85
\end{array}$
-What is the per unit cost when producing 1500 axles?
A)$71.67
B)$170.00
C)$85.00
D)$107.50

Quizplus · Accepted Answer

The fixed manufacturing overhead per unit decreases as production increases because the total fixed costs are spread over more units. When production increases from 1000 to 1500 axles, the variable costs (direct materials, direct manufacturing labor, and variable manufacturing overhead) remain the same per unit, totaling $45. The fixed manufacturing overhead per unit, however, decreases. Originally, the fixed overhead cost per unit is $40 when producing 1000 units. Since the total fixed costs remain constant regardless of the number of units produced, when production increases to 1500 units, the fixed overhead cost per unit is spread over more units, reducing the per unit cost. The total manufacturing costs per unit decrease as a result, but the question does not provide enough information to accurately calculate the new per unit cost using the options given. The correct approach involves recalculating the fixed overhead per unit for 1500 units and adding it to the variable costs per unit, but the provided options and data do not align with a straightforward calculation. Therefore, the selection is based on understanding that the cost per unit decreases due to the fixed cost spread, but the exact answer cannot be determined from the given options without additional calculation details.

Answer the Following Questions Using the Information Below: Axle and Wheel

Answer the Following Questions Using the Information Below:
Axle and Wheel