Question

3.

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

Production volume	5,900	units	6,900	units
Direct materials	$76.90	per unit	$76.90	per unit
Direct labor	$51.20	per unit	$51.20	per unit
Manufacturing overhead	$76.40	per unit	$66.40	per unit

The best estimate of the total cost to manufacture 6,200 units is closest to: (Do not round intermediate calculations.)

Answer 1

Direct materials and direct labor are variable costs as the cost per output is same.

Total manufacturing overhead for 5900 units = 5900*76.40 = 450,760

Total manufacturing overhead for 6900 units = 6900*66.40 = 458,160

Variable Manufacturing Overhead = (Cost at highest activity - Cost at lowest activity)/(Highest activity-Lowest activity)

= (458,160-450,760)/(6900-5900) = 7.4

Fixed manufacturing overhead = 458,160 - (6900*7.4) = 407,100

.

Total Cost for 6,200 units

= Variable cost (76.90+51.20+7.40)*6200 +Fixed cost 407,100

= 1,247,200