The best estimate of the total cost to manufacture 5,300 units is closest to:

A) $1,116,180
B) $1,062,915
C) $1,080,000
D) $1,009,650

Question

The best estimate of the total cost to manufacture 5,300 units is closest to:A) $1,116,180B) $1,062,915C) $1,080,000D) $1,009,650

Travis Mathews · Accepted Answer

Final Answer : C, Explanation :  There is not enough information to accurately estimate the cost to manufacture 5,300 units. Without knowing the specific production costs and factors involved, any estimate would be purely speculative. Therefore, the best choice is to select the closest answer, which in this case is C: $1,080,000. Note: There are several ways to computer the variable cost per unit for direct materials and direct labor.Direct materials:Variable cost per unit = Change in cost ÷ Change in activity= ($124,200 - $103,500)÷ (6,000 units - 5,000 units)= $20,700 ÷ 1,000 units= $20.70 per unitDirect labor:Variable cost per unit = Change in cost ÷ Change in activity= ($339,000 - $282,500)÷ (6,000 units - 5,000 units)= $56,500 ÷ 1,000 units= $56.50 per unitManufacturing overheadVariable cost per unit = Change in cost ÷ Change in activity= ($679,800- $667,000)÷ (6,000 units - 5,000 units)= $12,800 ÷ 1,000 units= $12.80 per unitTotal variable cost per unit = $20.70 per unit + $56.50 per unit + $12.80 per unit= $90.00 per unitFixed cost = Total cost - Variable cost element= $679,800 - ($12.80 per unit × 6,000 units)= $679,800 - $76,800= $603,000Total fixed cost per month = $0 + $603,000 = $603,000Total cost = Total fixed cost + Total variable cost= $603,000 + ($90.00 per units × 5,300 units)= $603,000 + $477,000= $1,080,000Reference: APP06A-Ref8(Appendix 6A)Wuensch Inc., an escrow agent, has provided the following data concerning its office expenses:   Management believes that office expense is a mixed cost that depends on the number of escrows completed.Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction.

The best estimate of the total cost to manufacture 5,300 units is closest to:

A) $1,116,180
B) $1,062,915
C) $1,080,000
D) $1,009,650

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