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Davis 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 1,000 units 2,000 units
Direct materials $ 44,200 $ 88,400
Direct labor $ 37,300 $ 74,600
Manufacturing overhead $ 48,500 $ 62,200
The best estimate of the total monthly fixed manufacturing cost is:_________
a. $177,600
b. $225,200
c. $130,000
d. $34,800

Respuesta :

Answer: $34800

Explanation:

Fixed cost is simply calculated as:

Total cost - Variable cost.

We need to find the total monthly variable manufacturing cost. To get this we'll calculate the variable cost per unit first. This can be calculated as:

= ($62200 − $48500)/(2000 units − 1000 units)

= $13700/1000 units

Variable cost per unit = $13.70 per unit

Variable cost = $13.70 × 1000

= $13,700

Fixed cost = Total cost - Variable cost.

Fixed cost = $48500 - $13700

Fixed cost = $34,800

The best estimate of the total monthly fixed manufacturing cost is $34800

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