X Company manufactures a single product and estimates its total variable manufac

Question

X Company manufactures a single product and estimates its total variable manufacturing costs each month. Each unit of product requires 2.1 pounds of direct material, and the price per pound is $21.00. It takes one hour of direct labor time to manufacture a unit of product. Direct labor employees are paid $12.20 per hour. The monthly overhead cost function is $4,000+$2.05X, where X is the number of units produced.

If production next month is expected to be 1,000 units, what are estimated total variable manufacturing costs?

Explanation / Answer

Direct Material Cost = 1000 x 2.1 x $21                    = $44,100

Direct Labor Cost = 1000 x 1 x $12.20                        = $12,200

Variable manufacturing overhead =2.05 x1000   = $2,050

Total variable manufacturing overhead = $58,350

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