Orr Corporation's manufacturing costs for August when production was 750 units appears below: How much is the budgeted manufacturing cost for a month when 500 units are produced?

Question

Orr Corporation's manufacturing costs for August when production was 750 units appears below:  How much is the budgeted manufacturing cost for a month when 500 units are produced?

Quizplus · Accepted Answer

To find the budgeted manufacturing cost for 500 units, we need to use the concept of a variable cost per unit. In this case, the variable cost per unit can be calculated as follows:

Variable cost per unit = Total variable manufacturing cost / Number of units produced

Variable cost per unit = ($12,000 + $4,000) / 750 = $20

Using this variable cost per unit, we can find the budgeted manufacturing cost for 500 units:

Budgeted manufacturing cost = Variable cost per unit * Number of units produced

Budgeted manufacturing cost = $20 * 500 = $10,000

However, we also need to add the fixed manufacturing cost of $10,000 to this amount:

Budgeted manufacturing cost = Variable cost per unit * Number of units produced + Fixed manufacturing cost

Budgeted manufacturing cost = $20 * 500 + $10,000 = $20,000

Therefore, the correct answer is C: $20,000.

Orr Corporation's Manufacturing Costs for August When Production Was 750