Question

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

Production Volume 6000 units 7000 units

Direct Materials $340,200 $396,900

Direct Labor $81,000 $94,500

Manufacturing Overhead $1,003,200 $1,015,000

The estimated total cost to manufacture 6300 units would be:

Answer 1

First, calculate the variable manufacturing overhead cost per unit:
Variable manufacturing overhead cost = Change in cost Change in activity
= ($1,015,000 - $1,003,200) (7,000 - 6,000)

= $11.80
Fixed cost element of manufacturing overhead  = Total cost - Variable cost element

= $1,015,000 - ($11.80 x 7,000)

= $932,400
Variable direct materials cost = $340,200 6,000 units

= $56.70
Variable direct labor cost = $81,000 6,000 units

= $13.50
Total variable manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead
Total variable manufacturing cost per unit = $56.70 + $13.50 + $11.80 = $82.00
The estimated total cost to manufacture 6300 units would be :

= $932,400 + ($82.00 x 6,300) = $1,449,000

Thus the estimated total cost to manufacture 6300 units would be $1,449,000