Question

Buildz Manufacturing currently produces 1000 tables per month. The following per unit data for 1000 tables apply for sales to regular​ customers:

Direct materials 50
Direct manufacturing labor 10
Variable manufacturing overhead 15
Fixed manufacturing overhead 30
Total manufacturing costs 105
The plant has capacity for 3000 tables and is considering expanding production to 3000 tables. What is the total cost of producing
3000 ​tables?

Answer 1

The total cost of producing 3,000 tables at Buildz Manufacturing is $255,000, with variable costs being $225,000 and fixed costs remaining at $30,000.

Step-by-step explanation:

The total cost of producing 3,000 tables at Buildz Manufacturing can be calculated by considering both variable and fixed costs. Variable costs, which include direct materials, direct manufacturing labor, and variable manufacturing overhead, will increase with production. Fixed manufacturing overhead, however, will remain constant regardless of the number of tables produced.

To calculate the total variable cost for 3,000 tables, we multiply the per unit variable costs by the quantity: (Direct materials at $50 + Direct manufacturing labor at $10 + Variable manufacturing overhead at $15) x 3,000 tables = $225,000. The fixed manufacturing overhead remains at $30 per table, which amounts to $30 x 1,000 = $30,000 since it does not increase with production. When expanding to 3,000 tables, this fixed cost is spread over more units, effectively reducing the per-unit fixed cost but not changing the total fixed cost.

Hence, the total cost of producing 3,000 tables is the sum of the variable costs and the fixed costs: $225,000 + $30,000 = $255,000.