Question

Eucalyptus Company has the following budgeted variable costs per unit produced: Direct materials $0.35 Direct labor $0.28 Variable overhead: Supplies $0.04 Indirect labor $0.09 Power $0.03 Budgeted fixed overheads per quarter include rent of $25,000 and depreciation of $150,000. Calculate the cost of production at the activity level of 2,200,000 units.

Answer 1

Answer:

The cost of production at the activity level of 2,200,000 units is $1,913,000

Explanation:

Total budgeted variable costs per unit

= Direct materials + Direct labor + Variable overhead

= $0.35 + $0.28 + ($0.04 + $0.09 + $0.03)  

= $0.35 + $0.28 + $0.16

= $0.79

Cost of Production

= Total Variable costs + Total Fixed costs

= (Units produced*Variable costs per unit) + (Rent + Depreciation)

= (2,200,000*$.79) + ($25,000 + $150,000)

= $1,738,000 + $175,000

= $1,913,000

Therefore, The cost of production at the activity level of 2,200,000 units is $1,913,000