Question

Grand-Cola spends $1 on direct material direct labor, and variable manufacturing overhead for every unit (12-pack of soda i produces Freed manufacturing overhead costs $6 million per year. The plant, which is currently operating at only 5% of capacity, produced 30 milions this year Management to operate closer to full capably next year producing 40 million units Management des anticipate any changes in the prices pays for materials, labor and manufacturing Read the revirements Requirement. What is the current al product cost for the 30 million units including fixed and variable ? Determine the formula, the calculate the current total product cost for the 30 million units), including fixed and reco - Total producto Requirement 2. What is the current average product cost per un Det formula, then calculate the current average product cost per unit (Enter your answer to the nearest cont Current verage producto per unit Imision 1 Requirement. What is the current fed per unit? Dumine the form the calculate the current fed cost perit your answer to the nearest cant) - Current cost per un Requirement 4. What is the forecasted to product costs year for the 40 milion units, including fixed and variable costa? Determine the form the calculate the forecasted to product costs year for the 40 milion units) Forecasted =productos Requirements. What is the forecasted average product co next year? De the found the forecasted average produtos perunter your answer to the nearest) Forecasted average productos per una Requirement. What is the forced content Determine the force the forced feed cost per unter your wo the most cont Forecast footer Choose from anonymer the input fechando continue to next to

Answer 1

1.

Total Variable Production Costs	+	Fixed Manufacturing Overhead	=	Total Product Cost
$ 30 million	+	$ 6 million	=	$ 36 million

2.

Total Product Costs	/	Number of Units	=	Current Average Product Cost per Unit
$ 36 million	/	30 million	=	$ 1.20 per unit

3.

Total Fixed Manufacturing Overhead	/	Number of Units	=	Current Fixed Cost per Unit
$ 6 million	/	30 million	=	$ 0.20 per unit

4.

Total Variable Production Costs	+	Fixed Manufacturing Overhead	=	Forecasted Total Product Costs
$ 40 million	+	$ 6 million	=	$ 46 million

5.

Forecasted Total Product Costs	/	Units Produced	=	Forecasted Average Product Cost per Unit
$ 46 million	/	40 million	=	$ 1.15 per unit

6.

Total Fixed Manufacturing Overhead	/	Units Produced	=	Forecasted Fixed Cost per Unit
$ 6 million	/	40 million	=	$ 0.15 per unit

7. Average product cost decreases due to economies of scale. Total fixed manufacturing overhead remains unchanged for the given capacity. Whether the units produced is 30 million or 40 million, the total fixed MOH remains the same. Therefore, as production volume increases, unit product cost decreases.