Question

The head of finance for Crane Corporation wants to know the expected manufacturing variable overhead cost for the third quarter of this year. In the second quarter, the company reported the manufacturing of 7400 units and a total variable manufacturing overhead of $66600. In addition to this, the production department has provided him the details below: Month Budgeted Number of Units to be Manufactured July 500 August 520 September 540 On the basis of the data above, what will the total variable manufacturing overhead cost of the third quarter of the year be?

1) $4500
2) $4680
3) $14040
4) $66600

Answer 1

The total variable manufacturing overhead cost for the third quarter of the year will be option 3) $14040.

Step-by-step explanation:

To find the total variable manufacturing overhead cost for the third quarter, we use the data provided for the number of units manufactured in each month and the total variable manufacturing overhead from the second quarter. The variable manufacturing overhead cost per unit can be calculated by dividing the total variable manufacturing overhead by the number of units produced in the second quarter:

Variable manufacturing overhead cost per unit = Total variable manufacturing overhead / Number of units produced = $66600 / 7400 units = $9 per unit.

Then, to find the total variable manufacturing overhead cost for the third quarter, we multiply the variable manufacturing overhead cost per unit by the total number of units to be manufactured in July, August, and September:

July units: 500 * $9 = $4500

August units: 520 * $9 = $4680

September units: 540 * $9 = $4860

Therefore, the total variable manufacturing overhead cost for the third quarter will be $4500 + $4680 + $4860 = $14040.

This calculation ensures that the variable overhead cost for each month is computed based on the number of units expected to be manufactured in that month, providing an accurate estimation of the total variable manufacturing overhead cost for the third quarter of the year.