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23 August, 03:56

Babuca 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 5,000 units 6,000 units

Direct materials $ 103,500 $ 124,200

Direct labor $ 282,500 $ 339,000

Manufacturing overhead $ 667,000 $ 679,800

The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.)

a. $90.00

b. $77.20

c. $12.80

d. $20.70

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Answers (1)
  1. 23 August, 06:08
    0
    Option (a) is correct.

    Explanation:

    Direct materials cost per unit:

    = Change in cost : Change in activity

    = ($ 124,200 - $ 103,500) : (6,000 units - 5,000 units)

    = $20,700 : 1,000 units

    = $20.7

    Direct labor cost per unit:

    = Change in cost : Change in activity

    = ($339,000 - $282,500) : (6,000 units - 5,000 units)

    = $56,500 : 1,000 units

    = $56.5

    Variable manufacturing overhead per unit:

    = Change in cost : Change in activity

    = ($679,800 - $667,000) : (6,000 units - 5,000 units)

    = $12,800 : 1,000 units

    = $12.8

    Therefore,

    Total variable manufacturing cost per unit:

    = Direct materials cost per unit + Direct labor cost per unit + Variable manufacturing overhead per unit

    = $20.7 + $56.5 + $12.8

    = $90
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