Final answer:
The total standard labor cost for producing 10,500 units at $3.40 per unit is $35,700 (option a). The best production method initially is Method 1 at $9,000, and if the cost of labor rises to $200/unit, Method 2 becomes preferable due to equal costs but less reliance on labor.
Step-by-step explanation:
The subject of this question is to determine the total standard labor cost for manufacturing a specific number of units based on a given cost per unit, and to calculate the costs associated with different production methods, considering changes in the cost of labor and capital. To find the total standard labor cost for 10,500 units at a cost of $3.40 per unit, we simply multiply the two:
10,500 units × $3.40/unit = $35,700
Regarding the best production method, we will need to calculate the total cost for each method:
Method 1: (50 units of labor × $100) + (10 units of capital × $400) = $9,000
Method 2: (20 units of labor × $100) + (40 units of capital × $400) = $17,000
Method 3: (10 units of labor × $100) + (70 units of capital × $400) = $28,500
Method 1 is the best production method with a total cost of $9,000. If the cost of labor rises to $200/unit, the methods would then compare as follows:
Method 1: (50 units × $200) + (10 units × $400) = $18,000
Method 2: (20 units × $200) + (40 units × $400) = $18,000
Method 3: (10 units × $200) + (70 units × $400) = $28,500
Methods 1 and 2 now have the same total cost of $18,000. However, the company might prefer the production method that relies less on labor, which might be more variable, especially during certain seasons or due to market conditions. Therefore, Method 2 would be the preferable choice in this scenario.