Bakan 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:

Question

Bakan 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:

Quizplus · Accepted Answer

Total manufacturing overhead at 4,000 units = 4,000 units × $60.40 per unit = $241,600
Total manufacturing overhead at 3,000 units = 3,000 units × $75.90 per unit = $227,700
Variable manufacturing overhead per unit = Change in cost ÷ Change in activity
= ($241,600 - $227,700)÷ (4,000 units - 3,000 units)
= $13,900 ÷ 1,000 units
= $13.90 per unit
Total variable manufacturing cost = Direct materials + Direct labor + Variable manufacturing overhead
= $86.30 per unit + $26.40 per unit + $13.90 per unit
= $126.60 per unit

Bakan Corporation Has Provided the Following Production and Average Cost