Chief Manufacturing currently produces 8,000 necklaces per month. Chief's relevant range of production is 7,500 to 11,000 necklaces. The following per unit data apply for sales to regular customers: Direct materials $10 per unit Direct labor $15 per unit Variable manufacturing overhead $7 per unit Fixed manufacturing overhead $8.50 per unit Sales commissions $3.25 per unit Fixed administrative costs $3 per unit The plant has the capacity to make 11,000 necklaces and is currently considering expanding production to 10,000 necklaces. What would be the total cost of producing 10,000 necklaces?

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Business

Baby Bird

7 May, 02:39

Chief Manufacturing currently produces 8,000 necklaces per month. Chief's relevant range of production is 7,500 to 11,000 necklaces. The following per unit data apply for sales to regular customers: Direct materials $10 per unit Direct labor $15 per unit Variable manufacturing overhead $7 per unit Fixed manufacturing overhead $8.50 per unit Sales commissions $3.25 per unit Fixed administrative costs $3 per unit The plant has the capacity to make 11,000 necklaces and is currently considering expanding production to 10,000 necklaces. What would be the total cost of producing 10,000 necklaces?

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Dalia Carlson · Answer 1

Total cost 127,250

Explanation:

Variable cost

DM 10

DL 15

VMO 7

Sales commissions 3.25

Unit variable cost 35.25

x 10,000 necklaces $35,250

Unit Fixed cost (at 8,000 necklaces)

fixed MO 8.5 x 8,000 = 68,000

fixed S&A 3 x 8,000 = 24,000

Total fixed cost 92,000

10,000 is within the relevant range, so it won't require additional fixed cost.

Total cost 127,250

Variable + fixed

35,250 + 92,000