Cardiv Corporation has provided the following production and average cost data for two levels of monthly production volume.The company produces a single product. 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

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.  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

Quizplus · Accepted Answer

Total manufacturing overhead at 5, 000 units = 5, 000 units × $62.10 per unit = $310, 500
Total manufacturing overhead at 4, 000 units = 4, 000 units × $73.60 per unit = $294, 400
Variable manufacturing overhead per unit = Change in cost ÷ Change in activity
= ($310, 500 - $294, 400)÷ (5, 000 units - 4, 000 units)
= $16, 100 ÷ 1, 000 units
= $16.10 per unit
Fixed cost element of manufacturing overhead = Total cost - Variable cost element
= $310, 500 - (5, 000 units × $16.10 per unit)
= $310, 500 - $80, 500
= $230, 000
Total variable manufacturing cost = Direct materials + Direct labor + Manufacturing overhead
= $85.80 per unit + $56.10 per unit + $16.10 per unit
= $158.00 per unit
Total manufacturing cost = Total variable manufacturing cost per unit × Total units manufactured + Total fixed manufacturing cost
= ($158.00 per unit × 4, 300 units)+ $230, 000
= $679, 400 + $230, 000
= $909, 400

Cardiv Corporation Has Provided the Following Production and Average Cost