First Apple Computers Company manufactures one product. If its variable manufact

Question

First Apple Computers Company manufactures one product. If its variable manufacturing cost is $18 per unit; total fixed manufacturing cost is $500,000:

Required:

1) Calculate First Apple’s total manufacturing costs if it produces 10,000 units.

2) What would be the total cost per unit (including both fixed and variable costs) assuming that Best Apple produces 10,000 units?

3) Calculate First Apple’s total manufacturing costs if it produces 20,000 units.

4) What would be the total cost per unit assuming that First Apple produces 20,000 units?

5) Compare your answers from parts 2 and 4. If the cost per unit is different at 10,000 units than at 20,000 units, explain why.

Explanation / Answer

1 Total manufacturing costs = (10000*18)+500000= 680000 2 Total cost per unit = 680000/10000 = 68 3 Total manufacturing costs = (20000*18)+500000= 860000 4 Total cost per unit = 860000/20000 = 43 5 At 10,000 units, the cost per unit is $68 whereas at 20,000 units, it is $43. The dfference is due to fixed manufacturing overhead per unit which decreases with increase in volume

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