Anderton 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 monthly fixed manufacturing cost is:
A)$391,200
B)$271,200
C)$656,400
D)$351,200

Question

Anderton 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 monthly fixed manufacturing cost is:
A)$391,200 
B)$271,200 
C)$656,400 
D)$351,200

Quizplus · Accepted Answer

Direct materials and direct labor are entirely variable since cost per unit does not change with changes in volume.Thus none of these costs are fixed and only manufacturing overhead is used to calculate the monthly fixed manufacturing cost.
First,calculate the variable manufacturing cost per unit:
 11eaaee8_6798_2022_933a_771a09a94ea8_TB5186_00 Variable manufacturing overhead cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($391,200 - $351,200) F1F1F1S1F1F1F10 (6,000 - 4,000) = $20.00
Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $391,200 - ($20.00 F1F1F1S1F1F1F10 6,000) = $271,200

Anderton Corporation Has Provided the Following Production and Average Cost