Question

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: 13,800 units, 15,000 units

Direct materials: 894,240,972,000

Direct labor: 255,300,277,500

Manufacturing overhead: 1,010,600,1,025,360

The best estimate of the total variable manufacturing cost per unit is:
1) 95.60
2) 83.30
3) 89.45
4) 87.10

Answer 1

To find the best estimate of the total variable manufacturing cost per unit, divide the total variable cost by the production volume at each level. The best estimate is $73.16 for 13,800 units and $68.36 for 15,000 units.

Step-by-step explanation:

The best estimate of the total variable manufacturing cost per unit can be found by dividing the total variable cost by the production volume. In this case, the total variable cost for the two levels of production volume are $1,010,600 and $1,025,360, and the respective production volumes are 13,800 units and 15,000 units. To calculate the total variable manufacturing cost per unit for each level, divide the total variable costs by their respective production volumes:

1. Total variable manufacturing cost per unit at 13,800 units: $1,010,600 / 13,800 = $73.16
2. Total variable manufacturing cost per unit at 15,000 units: $1,025,360 / 15,000 = $68.36

Therefore, the best estimate of the total variable manufacturing cost per unit is $73.16 for 13,800 units and $68.36 for 15,000 units.