(Appendix 5A) The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product:

-The best estimate of the total monthly fixed manufacturing cost is:
A) $221,200
B) $391,800
C) $173,800
D) $126,400

Question

(Appendix 5A) The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product:
 
-The best estimate of the total monthly fixed manufacturing cost is:
A) $221,200 
B) $391,800 
C) $173,800 
D) $126,400

Quizplus · Accepted Answer

Total manufacturing overhead at 2,000 units = 2,000 units × $86.90 per unit = $173,800
Total manufacturing overhead at 4,000 units = 4,000 units × $55.30 per unit = $221,200
 11ea7761_1888_c1fc_81a5_fb631562cfca_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $47,400 ÷ 2,000 units
= $23.70 per unit
Fixed cost = Total cost - Variable cost element
= $221,200 - ($23.70 per unit × 4,000 units)
= $221,200 - $94,800
= $126,400

(Appendix 5A) the Following Production and Average Cost Data for Two