Question

The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product: Production volume 2,000 units 4,000 units Direct materials $ 88.40 per unit $ 88.40 per unit Direct labor $ 20.60 per unit $ 20.60 per unit Manufacturing overhead $ 86.90 per unit $ 55.30 per unit The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.) Multiple Choice

Answer 1

Answer:

$132.70

Explanation:

The computation of the  total variable manufacturing cost per unit is shown below

But before that manufacturing overhead per unit is recorded

Variable manufacturing overhead

= (Cost at the highest activity - Cost at the lowest activity) ÷ (Highest activity-Lowest activity)

= [(2000 × 86.90) - (4000 × 55.30)] ÷ (2000 - 4000)

= (173,800 - 221,200) ÷ (-2000)

= 23.70 per unit

Now Total manufacturing cost per unit

= Direct Materials + Direct Labor + Variable Manufacturing Overhead

= $88.40 + $20.60 + $23.70

= $132.70