Question

Ridez Manufacturing currently produces 4,000 bicycles per month. The following per unit data apply for sales to regular customers:

Direct materials (DM): 53 $53

Direct manufacturing labor (DML): 10 10
Variable manufacturing overhead (VMO): 12 12
Fixed manufacturing overhead (FMO): 14 14
Total manufacturing costs: $89 $89


The plant has capacity for 6,000 bicycles and is considering expanding production to 5,000 bicycles. What is the per unit cost of producing 5,000 bicycles?

a) $89
b) $92
c) $96
d) $100

Answer 1

The new per unit cost of producing 5,000 bicycles would be $86.20, as fixed manufacturing overhead is spread over more units, decreasing the per unit fixed cost. However, this answer does not match any of the provided choices, indicating a possible error in the question.

Step-by-step explanation:

The question is asking for the per unit cost of producing 5,000 bicycles, given the current production level and cost data for Ridez Manufacturing. Since the fixed manufacturing overhead (FMO) is spread out over more units as production increases, the per unit fixed cost will decrease. The direct materials (DM), direct manufacturing labor (DML), and variable manufacturing overhead (VMO) remain the same on a per unit basis.

To calculate the new per unit cost:

• Fixed costs total will stay the same, but the FMO per unit will decrease because it will be spread over more units (5,000 instead of 4,000).
• Total FMO = 4,000 units * $14 = $56,000
• New FMO per unit = $56,000 / 5,000 units = $11.20
• Sum the new FMO per unit with the unchanged per unit costs of DM, DML, and VMO.
• New total cost per unit = $53 (DM) + $10 (DML) + $12 (VMO) + $11.20 (new FMO) = $86.20

However, this does not match any of the answer choices provided, which suggests there may be a discrepancy in the information given or perhaps a typo in the available choices. Based on the information provided, it seems the answer choices are incorrect.