Orange Company had the following information available: Expected Costs and Selling Price Based on 5,000 units:
In the flexible budget at 10,000 units,what is the total manufacturing cost?
A)$250,000
B)$420,000
C)$520,000
D)$700,000

Question

Orange Company had the following information available: Expected Costs and Selling Price Based on 5,000 units:
  In the flexible budget at 10,000 units,what is the total manufacturing cost?
A)$250,000 
B)$420,000 
C)$520,000 
D)$700,000

Quizplus · Accepted Answer

To find the total manufacturing cost at 10,000 units, we need to use the concept of flexible budgeting. We can assume that the cost behavior remains the same when we increase the production level from 5,000 units to 10,000 units. 
To calculate the manufacturing cost, we need to use the formula:
Manufacturing Cost = Direct Materials + Direct Labor + Manufacturing Overhead
From the table, we know that the expected cost per unit of direct materials, direct labor, and manufacturing overhead remains the same at different production levels. Therefore, we can multiply the expected cost per unit with the number of units to get the manufacturing cost for that category. 
For example, to calculate the direct materials cost at 10,000 units, we can use the following calculation:
Direct materials cost = Expected cost per unit * Number of units
= $20 * 10,000
= $200,000
Similarly, we can calculate the direct labor and manufacturing overhead costs. 
Adding all three costs, we get:
Manufacturing Cost = Direct Materials + Direct Labor + Manufacturing Overhead
= $200,000 + $140,000 + $80,000
= $420,000
Therefore, the correct answer is B.

Orange Company Had the Following Information Available: Expected Costs and Selling