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)$65,400
B)$88,200
C)$93,100
D)$54,000

Question

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)$65,400 
B)$88,200 
C)$93,100 
D)$54,000

Quizplus · Accepted Answer

Total manufacturing overhead at 1,000 units = 1,000 units × $65.40 per unit = $65,400
Total manufacturing overhead at 3,000 units = 3,000 units × $29.40 per unit = $88,200
 11eaa3fe_33da_f64b_908b_c3253a1fc804_TB2461_00 Variable cost per unit = Change in cost ÷ Change in activity
= $22,800 ÷ 2,000 units
= $11.40 per unit
Fixed cost = Total cost - Variable cost element
= $88,200 - ($11.40 per unit × 3,000 units)
= $88,200 - $34,200
= $54,000

The Following Production and Average Cost Data for Two Levels