Baker Corporation has provided the following production and average cost data for two levels of monthly production volume.The company produces a single product. The best estimate of the total variable manufacturing cost per unit is:
A)$89.50
B)$18.40
C)$71.10
D)$30.90

Question

Baker Corporation has provided the following production and average cost data for two levels of monthly production volume.The company produces a single product.  The best estimate of the total variable manufacturing cost per unit is:
A)$89.50 
B)$18.40 
C)$71.10 
D)$30.90

Quizplus · Accepted Answer

Total manufacturing overhead at 3, 000 units = 3, 000 units × $33.80 per unit = $101, 400
Total manufacturing overhead at 1, 000 units = 1, 000 units × $64.60 per unit = $64, 600
Variable manufacturing overhead per unit = Change in cost ÷ Change in activity
= ($101, 400 - $64, 600)÷ (3, 000 units - 1, 000 units)
= $36, 800 ÷ 2, 000 units
= $18.40 per unit
Total variable manufacturing cost = Direct materials + Direct labor + Variable manufacturing overhead
= $30.90 per unit + $40.20 per unit + $18.40 per unit
= $89.50 per unit

Baker Corporation Has Provided the Following Production and Average Cost