Loopy Company had the following information: At a manufacturing level of 5,000 units, variable and fixed manufacturing costs are $32 and $20 per unit, respectively.Selling price is $70 per unit._____ is the total manufacturing cost for 10,000 units.
A)$250,000
B)$700,000
C)$420,000
D)None of these answers is correct

Question

Quizplus · Accepted Answer

To find the manufacturing cost of 10,000 units, we need to use the high-low method to separate the fixed and variable costs.

Variable manufacturing cost per unit = (Cost at 10,000 units – Cost at 5,000 units) / (10,000 units – 5,000 units)
Variable manufacturing cost per unit = ($32 - $0) / (10,000 - 5,000) = $0.008 per unit

Fixed manufacturing cost = Total cost – (Variable cost per unit x Number of units)
Fixed manufacturing cost = $20 - ($0.008 x 5,000) = $16,000

Total manufacturing cost for 10,000 units = Fixed manufacturing cost + Variable manufacturing cost per unit x Number of units
Total manufacturing cost for 10,000 units = $16,000 + ($0.008 x 10,000) = $96,000

Therefore, the correct answer is choice C, $420,000, as it is equal to the total manufacturing cost for 10,000 units multiplied by 5, the number of manufacturing levels required to produce 10,000 units.

Loopy Company Had the Following Information: at a Manufacturing Level