Question

Chief Manufacturing currently produces 8,000 necklaces per month. Chief's relevant range of production is 7,500 to 11,000 necklaces. The following per unit data apply for sales to regular customers: Direct materials $10 per unit Direct labor $15 per unit Variable manufacturing overhead $7 per unit Fixed manufacturing overhead $8.50 per unit Sales commissions $3.25 per unit Fixed administrative costs $3 per unit The plant has the capacity to make 11,000 necklaces and is currently considering expanding production to 10,000 necklaces. What would be the total cost of producing 10,000 necklaces?

Answer 1

Answer:

Total cost 127,250

Explanation:

Variable cost

DM                              10

DL                               15

VMO                            7

Sales commissions     3.25

Unit variable cost      35.25

x 10,000 necklaces $35,250

Unit Fixed cost (at 8,000 necklaces)

fixed MO  8.5         x 8,000 =    68,000

fixed S&A 3            x 8,000 =   24,000

Total fixed cost                         92,000

10,000 is within the relevant range, so it won't require additional fixed cost.

Total cost 127,250

Variable + fixed

35,250  +   92,000