Question

Perteet Corporation's relevant range of activity is 6,900 units to 13,500 units. When it produces and sells 10,200 units, its average costs per unit are as follows:

AverageCost per UnitDirect materials$7.40 Direct labor$3.75 Variable manufacturing overhead$1.90 Fixed manufacturing overhead$3.30 Fixed selling expense$0.75 Fixed administrative expense$0.45 Sales commissions$0.55 Variable administrative expense$0.60

If 7,600 units are produced, the total amount of manufacturing overhead cost is closest to:

Answer 1

The total manufacturing overhead cost for Perteet Corporation when producing 7,600 units is calculated by adding the total variable manufacturing overhead ($14,440) to the total fixed manufacturing overhead ($33,660), which amounts to $48,100.

Step-by-step explanation:

The student is seeking to determine the total manufacturing overhead cost for Perteet Corporation when 7,600 units are produced. To calculate this, we need to add the variable manufacturing overhead (which changes with the level of production) to the fixed manufacturing overhead (which remains constant regardless of production level).

Given that the fixed manufacturing overhead is $3.30 per unit and the variable manufacturing overhead is $1.90 per unit, the combined per-unit manufacturing overhead when 10,200 units are produced is $5.20 per unit. However, since fixed costs do not change with the number of units produced, we only multiply the variable overhead cost by the new production level to find the total variable manufacturing overhead cost, and then add the total fixed manufacturing overhead cost.

To calculate the total manufacturing overhead cost for 7,600 units, we use the following steps:

1. Calculate the total variable manufacturing overhead: 7,600 units * $1.90 = $14,440.
2. Calculate the total fixed manufacturing overhead: It does not change with production levels and is constant, so for 10,200 units, it is 10,200 units * $3.30 = $33,660. For 7,600 units, it remains at $33,660.
3. Add the total variable overhead to the total fixed overhead to obtain the total manufacturing overhead cost: $14,440 (total variable) + $33,660 (total fixed) = $48,100.

Therefore, the total manufacturing overhead cost when 7,600 units are produced is closest to $48,100.