how to calculate manufacturing cost (accounting)?
it says the relevant range is 7500-12500 units. when 10,000 units are sold its unit costs are:
direct materials $6 per unit
direct labor $3.50 per unit
variable manufacturing overhead $1.50 per unit
fixed manufacturing overhead $4 per unit
fixed selling expense $3 per unit
fixed administrative expense $2 per unit
sales commissions $1 per unit
variable administrative expense $ .50 per unit
if 12,500 units are produced what is the total manufacturing cost incurred? and what is this amount on a per unit basis?
if you could just explain to me how to go about calculating this. the text is a bit unclear. thanks so much.
fixed costs do not vary with the number of units made. They are always there. Variable costs are tied to volume, usually in cost per unit, often having knee-functions at escalated levels (e.g., the first 12,500 units at X per unit, the next 20,000 units at a lower or higher cost per unit, based on economies of scale).
Subtotal all your fixed costs. Multiply your variable costs by the number of units for second subtotal. Total cost is the sum of the subtotals. Total cost per unit it that total divided by number of units.