Question

Farmington 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 6,000 units 7,000 units
Direct materials $89.50 $89.50
Direct labor $40.20 $40.20
Manufacturing overhead $80.10 $72.20
What is the total fixed manufacturing cost?

Answer 1

$331,800

Step-by-step explanation:

For 6,000 units, the direct material cost is $89.5 per unit, the direct labor cost is $40.2 per unit, while the manufacturing overhead cost is $80.10

Also, for 7,000 units, the direct material cost is $89.50 per unit, the direct labor cost is $40.20 per unit, while the manufacturing overhead cost is $72.2

Total manufacturing overhead for 6,000 units = 6,000 × $80.10 = $480,600

Total manufacturing overhead for 7,000 units = 7,000 × $72.2 = $505,400

The variable cost per unit = ($505,400 - $480,600) / 1,000

= $24.8 per unit

Fixed costs

= Total cost - Total variable cost

= $505,400 - (7,000 × $24.8)

= $505,400 - $173,600

= $331,800