Bakken 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)$16.50
B)$90.40
C)$45.50
D)$106.90

Question

Bakken 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)$16.50 
B)$90.40 
C)$45.50 
D)$106.90

Quizplus · Accepted Answer

Direct materials and direct labor are entirely variable since cost per unit does not change with changes in volume.Thus none of these costs are fixed and only manufacturing overhead is used to calculate the monthly fixed manufacturing cost.
First,calculate the variable manufacturing cost per unit:
 11eaaee8_6798_6e44_933a_499e3f3ea9e2_TB5186_00 Variable manufacturing overhead cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($542,500 - $526,000) F1F1F1S1F1F1F10 (5,000 - 4,000) = $16.50
Variable manufacturing cost = $45.50 + $44.90 + $16.50 = $106.90

Bakken Corporation Has Provided the Following Production and Average Cost