A heavy equipment manufacturing company has produced its first unit using 3500 hours and $300,000 overhead cost. The next unit, i.e the second unit took 3300 hours. Overhead cost for this unit was $200,000. Suppose the labor was $20 per hour. Being the production manager, you need to decide what would be the total production costs for additional 10 units after the completion of the second unit. Round the final amount to nearest integer.
(A) $1,597,832
(B) $594,650
(C) $1,003,183
(D) None of the above
Answers
Answer:
d, none of the above
Explanation:
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Answer:
(D) None of the above.
Explanation:
To determine the total production cost for additional 10 units, we need to first calculate the cost per unit based on the information given for the first two units:
For the first unit:
Hours = 3500
Overhead cost = $300,000
Labor cost = $20 per hour
Total cost = Hours x Labor cost + Overhead cost
Total cost = 3500 x 20 + 300000
Total cost = $380,000
For the second unit:
Hours = 3300
Overhead cost = $200,000
Labor cost = $20 per hour
Total cost = Hours x Labor cost + Overhead cost
Total cost = 3300 x 20 + 200000
Total cost = $266,000
To calculate the cost per unit, we can take the average of the costs for the first two units:
Average cost per unit = (Total cost for first unit + Total cost for second unit) / 2
Average cost per unit = ($380,000 + $266,000) / 2
Average cost per unit = $323,000 / 2
Average cost per unit = $161,500
So the total production cost for additional 10 units would be:
Total cost for additional 10 units = Cost per unit x Number of units
Total cost for additional 10 units = $161,500 x 10
Total cost for additional 10 units = $1,615,000
Rounding this amount to the nearest integer, the total production cost for additional 10 units would be $1,615,000.