Spoken Manufacturing currently produces 6000 bicycles per mo

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 $40.00

Direct manufacturing labor 10.00

Variable manufacturing overhead 12.50

Fixed manufacturing overhead 10.50

Total manufacturing costs per unit $73.00

Compute total manufacturing cost per unit if production is reduced to 5,000 bicycles.

Solution

Direct material (5,000*$40) $ 200,000 Direct manufacturing labor (5,000*$10) $    50,000 Variable manufacturing overhead (5,000*$12.50) $    62,500 Fixed manufacturing overhead (6,000*$10.50) $    63,000 Total manufacturing cost $ 375,500