Babuca Corporation has provided the following production and

Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product 17000 units 15 $931,770 $344,250 units Direct materials Direct labor Manufacturing overhead $1,035,300 $382,50 $1,036,15 The best estimate of the total cost to manufacture 16,500 units is closest to: (Do not round Intermediate calculations.) O $2,405,0o0 o $2,381,690 O $2.311760 o $2,451,620

Solution

Variable cost/unit and Total fixed costs do not change with change in units.

Direct material cost/unit=($931770/15300)=$60.9

Direct labor=(344250/15300)=$22.5

For manufacturing overhead:

Variable cost=(1036150-1011500)/(17000-15300)=$14.5

Hence total fixed cost =1011500-(14.5*15300)=$789650

Hence

Total cost for 16500 units=(60.9*16500)+(22.5*16500)+(14.5*16500)+789650

which is equal to

=$2,405,000.