Answer:
Results are below.
Explanation:
Giving the following information:
Materials 2 leather strips $7.00
Labor 1.5 hr. $18.00
VOH 1.5 hr. $1.20
FOH $6,800
<u>First, we will determine the total cost at different production levels:</u>
3,500:
Direct material= 3,500*7= 24,500
Direct labor= 18*3,500= 63,000
VOH= 3,500*1.2= 4,200
FOH= 6,800
Total cost= $98,500
4,000:
Direct material= 4,000*7= 28,000
Direct labor= 18*4,000= 72,000
VOH= 4,000*1.2= 4,800
FOH= 6,800
Total cost= $111,600
4,500:
Direct material= 4,500*7= 31,500
Direct labor= 18*4,500= 81,000
VOH= 4,500*1.2= 5,400
FOH= 6,800
Total cost= $124,700
<u>Finally, the unitary cost:</u>
<u></u>
3,500:
Unitary cost= 98,500 / 3,500= $28.14
4,000:
Unitary cost= 111,600 / 4,000= $27.9
4,500:
Unitary cost= 124,700 / 4,500= $27.71
The production costs are essentially variable. In unitary bases, they remain constant. The fixed costs vary with the level of production on a unitary basis. <u>Therefore, the higher the units produced, the lower the fixed unitary cost.</u>
