Question

Antico Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

# of units produced	4,000	5,000
Direct material cost per unit	$3.20	$3.20
Direct labor cost per unit	$4.50	$4.50
Total MOH cost per unit	$9.40	$7.70
Variable S&A per unit	$1.20	$1.20
Fixed S&A per unit	$6.00	$4.80

The best estimate of the fixed element of total monthly manufacturing cost is (round to the nearest whole dollar if needed):

Group of answer choices

$37,600

$24,000

$34,000

$32,950

None of the other answer choices are correct.

Answer 1

The correct answer is

$ 34000

Calculation

manuafcturing cost comprises of direct material + direct labour + manufaccturing overheads. in the given data, direct material cost and direct labour cost per unit remain same for both the level of activity , so it means these cost are variable cost and manufacturing overhead cost has changed so it means it is mixed cost and includes fixed manufacturing overhead cost as well, so firstly we have to calculate the variable manufacturing overhead cost per unit

= (total manufacturing overhead for 5000 units - total manufacturing cost for 4000 Units) / (5000-4000)

= ((5000*7.7) - (4000*9.4))/1000

= 900/1000

= .9 per unit

Fixed cost = total manufacturing cost for 5000 units - (variable cost per unit *5000)

= (7.7*5000) - (.9*5000)

= 38500-4500

= $ 34000

Thus the total manufacturing fixed cost = $ 34000

So the correct answer is $ 34000