2. Sandford Company manufacturers one product. Its variable cost is $16 per unit

Question

2. Sandford Company manufacturers one product. Its variable cost is $16 per unit: tota fixed manufacturing cost is $600,000. (3 points) 1 Calculate Sandford's total manufacturing costs if it produces 10,000 units. 2 What would the total cost per unit (including both fixed and variable costs) assuming that Sandford produces 10,000 unites? 3 Calculate Sandford's total manufacturing costs if it produces 20,000 units? 4 What would be the total cost per unit assuming that Sandford produces 20,000 units? Compare your answers from parts 2 and 4. If the cost per unit is 10,000 units than at 20,000 units. Explain why. 5

Explanation / Answer

1 Total manufacturing costs=(10000*16)+600000= 760000 2 Cost per unit = 760000/10000 = 76 3 Total manufacturing costs=(20000*16)+600000= 920000 4 Cost per unit = 920000/20000= 46 5 The cost per units at 20000 units is less than cost per unit at 10000 units. The difference is due to the fact that fixed cost per unit decreases with increase in volume

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