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A Company's relevant range of manufacturing is 7,500 units to 12,500 units. The unit costs when it manufactures and sells 10,000 units are given below. If 8,000 units are made, what is the total manufacturing overhead cost incurred to support this production status?
Amount per unit ($)
Direct materials 6.00
Direct Labor 3.50
Variable manufacturing overhead 1.50
Fixed manufacturing overhead 4.00
Fixed selling overhead 3.00
Fixed administrative overhead 2.00
Sales commissions 1.00
Variable administrative overhead 0.50
Answer:
The total amount of manufacturing overhead cost incurred to support the level of production of 8,000 units is $52,000.
Explanation:
The following equation will help determine the total manufacturing overhead:
Total manufacturing overhead = Variable manufacturing overhead + Fixed manufacturing overhead
Total manufacturing overhead = ($1.50 per unit × 8,000 units) + $40,000
Total manufacturing overhead = $52,000
Note:
The fixed manufacturing overhead will be $40,000 ($4 * 10,000 units) within the range of 7,500 units to 12,500 units.
The manufacturing overhead of a business incorporates direct material, direct labor, and manufacturing overhead incurred during the transformation of raw materials into finished goods.
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