Question

Bakan Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

Production volume		4,600	units		5,600	units
Direct materials	$	94.70	per unit	$	94.70	per unit
Direct labor	$	31.60	per unit	$	31.60	per unit
Manufacturing overhead	$	78.80	per unit	$	70.80	per unit

The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-08-04

Multiple Choice

• $165.50

• $160.30

• $167.90

• $126.30

Answer 1

The total variable manufacturing cost per unit is calculated as follows:

Total manufacturing cost per unit = Direct material + Direct labor + Variable manufacturing overhead

= $94.70 + $31.60 + $34

= $160.30

Therefore, 2nd option is correct.

Where,

Variable manufacturing overhead = Difference in total manufacturing cost / Difference in units

= ($396,480 - $362,480) ( 5,600 units - 4,600 units)

= $34,000 / 1,000 units

= $34 per unit

Total manufacturing cost at 4,600 units = 4,600 * $78.80

= $362,480

Similarly at 5,600 units = 5,600 * $70.80

= $396,480

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