Michigan Cranberry Company sold $10 million worth of cranberries it produced. In producing cranberries, it purchased $1 million
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Answer:
Explanation:
We multiply the variable cost by each volume of production
for example direct materials 5 x 80,000 = 400,000
5 x 100,000 = 500,000
5 x 120,000 = 600,000
<u>Then for the fixed cost:</u>
notice the company expect to produce 1,200,000 units.
If fixed depreciation is $2 per unit then
1,200,000 x $2 = 2,400,000 depreciation per year.
we then divide this value by 12 to get the monthly fixed depreciation
2,400,000/12 = 200,000
Same procedure goes for supervision
1,200,000 units x $1 per unit = 1,200,000 per year
1,200,000/12 = 100,000 per month
Finally we add both, fixed and variable to et total overhead for the relevant range.