PLEASE SHOW ALL THE WORK SO I CAN UNDERSTAND HOW THE ANSWER IS REACHED! THANK YO

Question

PLEASE SHOW ALL THE WORK SO I CAN UNDERSTAND HOW THE ANSWER IS REACHED! THANK YOU!

Cardiv Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.

Production volume 10,200 units 11,200units

Direct materials $77.90 p/u $77.90 p/u

Direct labor $49.20 p/u $49.20 p/u

Manuf overhead $73.90 p/u $67.90 p/u

The best estimate of the total cost to manufacture 10,700 units is closest to: (Do not round intermediate calculations.)

$2,085,810

$2,117,100

$2,134,980

$2,123,805

Explanation / Answer

Variable cost per unit and total fixed costs remains same irrespective of change in units.

Hence direct material and direct labor are variable costs.

For manufacturing overheads:

Total cost at 10200 units=(10200*73.9)=753780

Total cost at 11200 units=(11200*67.9)=760480

Variable cost=(760480-753780)/(11200-10200)=$6.7/unit

Total fixed cost=753780-(6.7*10200)=$685440

Hence total cost at 10700 units=(77.9+49.2+6.7)*10700+685440

=$2,117,100(B)

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