Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.)
A) $90.00
B) $77.20
C) $12.80
D) $20.70

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.  The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.)
A) $90.00 
B) $77.20 
C) $12.80 
D) $20.70

Quizplus · Accepted Answer

Note: There are several ways to compute the variable cost per unit for direct materials and direct labor.
Direct materials:
Variable cost per unit = Change in cost ÷ Change in activity
= ($124,200 - $103,500) ÷ (6,000 units - 5,000 units)
= $20,700 ÷ 1,000 units
= $20.70 per unit
Direct labor:
Variable cost per unit = Change in cost ÷ Change in activity
= ($339,000 - $282,500) ÷ (6,000 units - 5,000 units)
= $56,500 ÷ 1,000 units
= $56.50 per unit
Manufacturing overhead
Variable cost per unit = Change in cost ÷ Change in activity
= ($679,800 − $667,000) ÷ (6,000 units - 5,000 units)
= $12,800 ÷ 1,000 units
= $12.80 per unit
Total variable cost per unit = $20.70 per unit + $56.50 per unit + $12.80 per unit
= $90.00 per unit

Babuca Corporation Has Provided the Following Production and Total Cost