Babuca Corporation has provided the following production and total 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)$82.00
B)$70.20
C)$56.70
D)$11.80

Question

Babuca Corporation has provided the following production and total 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)$82.00 
B)$70.20 
C)$56.70 
D)$11.80

Quizplus · Accepted Answer

There are several ways to computer the variable cost per unit for direct materials and direct labor.
Direct materials:
Variable cost per unit = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($396,900 - $340,200)F1F1F1S1F1F1F10 (7,000 units - 6,000 units)
= $56,700 F1F1F1S1F1F1F10 1,000 units
= $56.70 per unit
Direct labor:
Variable cost per unit = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($94,500 - $81,000)F1F1F1S1F1F1F10 (7,000 units - 6,000 units)
= $13,500 F1F1F1S1F1F1F10 1,000 units
= $13.50 per unit
Manufacturing overhead
Variable cost per unit = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($1,015,000- $1,003,200)F1F1F1S1F1F1F10 (7,000 units - 6,000 units)
= $11,800 F1F1F1S1F1F1F10 1,000 units
= $11.80 per unit
Total variable cost per unit = $56.70 per unit + $13.50 per unit + $11.80 per unit
= $82.00 per unit

Babuca Corporation Has Provided the Following Production and Total Cost