Question

Please show how the correct answer below is derived, please be specific. I did the first part of formula but can someone show exactly how the answer 1.58 is found?

Belfont Company produces door stoppers. August production costs are below:

Door Stoppers produced              79,000

Direct Material (variable) $20,000

Direct Labor (variable)   40,000

Supplies (variable)   20,000

Supervision (fixed) 28,100

Depreciation (fixed) 23,000

Other (fixed)     5,500

In September, Belfont expects to produce 100,000 door stoppers. Assuming no structural changes, what is Bellfonts production cost per door stopper for September?

The answer is 1.58

Formula…..

Divide variable costs (material, labor, supplies) by the original qty of door stoppers produced to get per unit costs of material, labor, and supplies.

2) Multiply per unit costs of material, labor, and supplies by 100,000 for each to arrive at total material, labor, and supply

costs.

3) Add fixed costs to variable costs to arrive at total costs for 100,000 door stoppers.

4) Divide total costs by 100,000 to arrive at per unit cost of door stopper

1)Variable costs (20,000+40,000+20,000)= 80,000 divided by 79,000 = 1.01265823

Answer 1

• Unit Product cost = Variable cost per unit + (Total Fixed cost/Units produced)
• Total Variable cost for 79,000 units = 20000 + 20000 + 40000 = $ 80,000.
• Variable cost per unit = $ 80,000 / 79,000 units = $1.0126….. per unit [CORRECTLY COMPUTED BY YOU]
• Total fixed cost = 28100 + 23000 + 5500 = $ 56,600

Units expected to be produced = 100,000

Fixed cost per expected units = $ 56,600 / 100,000 units = $ 0.566 per unit.

• Total unit product cost = Variable cost per unit + Fixed Cost per unit

= $ 1.01 + $ 0.566

= $ 1.576 per unit.

>$ 1.576 when rounded off becomes $ 1.58 per unit [Which is equals to Answer Value]

OR

>Step 1: Variable cost per unit computed by you = $ 1.01265823 per unit.

>Step 2: Total variable cost for 100,000 units = 100,000 units x $ 1.01265823 = $ 101,265.823

>Step 3: Total Variable cost + Total Fixed cost = 101265.823 + 56600 = $ 157,865.823

>Step 4: Cost per unit = $ 157,865.823 / 100,000 units = $ 1.578 (rounded off to $ 1.58)