Question

LUL SUUN Bubbly Cola spends $200 on direct materials, direct labour, and variable manufacturing overhead for every unit (12-pack of soda) it produces. Fixed manufacturing overhead costs $1 million per year. The plant, which is currently operating at only 65% of capacity, produced 20 million units this year Management plans to operate closer to full capacity next year, producing 25 million units. Management does not anticipate any changes in the prices it pays for materials, labour and manufacturing overhead berman + Requirement a. What is the current total product cost for the 20 million units) including fixed and variable costs? Determine the formula, then calculate the current total product cost Total fixed costs Total variable costs Total product costs $ 4 million + 5 40 million 44 million Requirement b. What is the current average product cost per unit? Determine the formula then calculate the current average product cost per unit. (Round your answer to the nearest cont.) Current average = product cost per unit 1 million 1 milion per un Choose from any list or enter any number in the input fields and then click Check Answer

Answer 1

a. Current total product cost for 20million units = fixed costs + variable cost

Fixed cost = 4 million (FMOH)

Variable cost = no. Of units * VC per unit

= 20 million *2 =40 million

Total product cost = $4 + $40 = $44 million

b. Average product cost per unit

= total cost / no. Of units

= $44million / 20 million = $ 2.2 per unit