Question

Edal Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. Production volume 5,000 units 6,000 units Direct materials $ 266,500 $ 319,800 Direct labor $ 52,000 $ 62,400 Manufacturing overhead $ 748,500 $ 769,200 The best estimate of the total variable manufacturing cost per unit is:

Answer 1

Answer:

$84.40

Explanation:

The Manufacturing overhead is a mixed cost, we need to separate the variable and fixed element first.

Using High - Low Method this will be :

Variable Element = ($ 769,200 - $ 748,500) ÷ 1,000

                             = $20.70

Total Variable Costs = $53.30 + $10.40 + $20.70

                                  = $84.40

The best estimate of the total variable manufacturing cost per unit is: $84.40