Dacosta 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 monthly fixed manufacturing cost is: (Round your intermediate calculations to 2 decimal places.)

Question

Dacosta 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 monthly fixed manufacturing cost is: (Round your intermediate calculations to 2 decimal places.)

Quizplus · Accepted Answer

To calculate the total monthly fixed manufacturing cost, we need to find the difference between the total cost at the lower production level (10,000 units) and the variable cost per unit multiplied by the production level.

Total variable cost per unit = (Total cost at higher production level - Total cost at lower production level)/(Higher production level - Lower production level)
Total variable cost per unit = ($3,161,300 - $3,068,400)/(14,000 - 10,000)
Total variable cost per unit = $24.475

Total monthly fixed manufacturing cost = Total cost at lower production level - (Total variable cost per unit x lower production level)
Total monthly fixed manufacturing cost = $814,800 - ($24.475 x 10,000)
Total monthly fixed manufacturing cost = $814,800 - $244,750
Total monthly fixed manufacturing cost = $570,050

Therefore, the best estimate of the total monthly fixed manufacturing cost is $814,800 (Option C).

Dacosta Corporation Has Provided the Following Production and Total Cost