managerial accting solutions

Bakker 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	13,300	units	14,300	units
Direct materials	$96.70	per unit	$96.70	per unit
Direct labor	$24.60	per unit	$24.60	per unit
Manufacturing overhead	$74.30	per unit	$70.30	per unit

The best estimate of the total variable manufacturing cost per unit is:

	$167.00
	$138.40
	$121.30
	$159.50

Total manufacturing overhead at 14,300 units = 14,300 units × $70.30 per unit = $1,005,290
Total manufacturing overhead at 13,300 units = 13,300 units × $74.30 per unit = $988,190
Variable manufacturing overhead per unit = Change in cost ÷ Change in activity
= ($1,005,290 - $988,190) ÷ (14,300 units - 13,300 units)
= $17,100 ÷ 1,000 units
= $17.10 per unit
Total variable manufacturing cost = Direct materials + Direct labor + Variable manufacturing overhead
= $96.70 per unit + $24.60 per unit + $17.10 per unit
= $138.40 per unit

Multiple Choice	Learning Objective: 02-03 Understand cost behavior patterns including variable costs, fixed costs, and mixed costs.
Difficulty: Hard	Learning Objective: 02-04 Analyze a mixed cost using a scattergraph plot and the highlow method.