06 Spoken Manufacturing currently produces 6000 bicycles per

06. Spoken Manufacturing currently produces 6,000 bicycles per month. Company has the capacity to produce up to 7,000 units. The following per unit data apply for sales to regular customers: Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead $40.00 10.00 12.50 10.50 $73.00 Total manufacturing costs per unit Compute total manufacturing cost per unit if production is reduced to 4,000 bicycles.

Solution

NOTE:Total fixed cost and variable cost per unit do not change with change in units.

Current variable cost per unit=Direct materials+Direct manufacturing labor+Variable manufacturing overhead

=(40+10+12.5)=$62.5

Current total fixed cost=Total fixed manufacturing overhead

=(10.5*6000)=$63000

Hence fixed cost at 4000 bicycles=(63000/4000)=$15.75

Hence total manufacturing cost at 4000 bicycles=Fixed cost+Variable cost

=(15.75+62.50)

=$78.25