Baker 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:
A)$32.40
B)$44.80
C)$66.20
D)$21.40

Question

Baker 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:
A)$32.40 
B)$44.80 
C)$66.20 
D)$21.40

Quizplus · Accepted Answer

Note: There are several ways to computer the variable cost per unit for direct materials and direct labor.
Direct materials:
Variable cost per unit = Change in cost ÷ Change in activity
= ($226,800 - $194,400)÷ (7,000 units - 6,000 units)
= $32,400 ÷ 1,000 units
= $32.40 per unit
Direct labor:
Variable cost per unit = Change in cost ÷ Change in activity
= ($86,800 - $74,400)÷ (7,000 units - 6,000 units)
= $12,400 ÷ 1,000 units
= $12.40 per unit
Manufacturing overhead
Variable cost per unit = Change in cost ÷ Change in activity
= ($779,800 - $758,400)÷ (7,000 units - 6,000 units)
= $21,400 ÷ 1,000 units
= $21.40 per unit
Total variable cost per unit = $32.40 per unit + $12.40 per unit + $21.40 per unit
= $66.20 per unit

Baker Corporation Has Provided the Following Production and Total Cost