ge Enterprises is a manufacturing company that produces cast iron mailboxes. In

Question

ge Enterprises is a manufacturing company that produces cast iron mailboxes. In the current year, Eale plans to produce 5,700 mailboxes and Eagle's plant manager uses a cost equation to estimate the total manufacturing cost of the 5,700 mailboxes. Eagle's current year total fixed manufacturing costs and perunit variable costs are the same as in the prior year. In the prior year, Eagle produced 300 maitboxes at an average total cost of $35 per mailbox, and Eagle's total fixed manufacturing os were $60,200. What is the estimated total cost of manufacturing 5,700 mailboxes? 119 700 $179 900 5199 500 5240,100 None of the above

Explanation / Answer

Answer:

Correct answer is : $179,900

Workings:

Eagle produced 4,300 mail boxes at an average cost $35 per box.

Hence total cost of manufacturing 4,300 boxes = $35 * 4,300 = $150,500

Eagle's total fixed manufacturing cost = $60,200

Hence, total variable costs of manufacturing 4,300 boxes = Total manufacturing cost - Fixed manufacturing cost = $150,500 - $60,200 = $90,300

Hence, variable manufacturing cost per box = $90,300 / 4,300 = $21

Current year fixed cost and variable costs are same as in the prior year.

Hence,

Estimated total cost of manufacturing 5,700 boxes = Fixed manufacturing cost + Total variable cost = $60,200 + 5,700 * $21 = $179,900

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