Stanfil Corporation developed a cost function for manufacturing overhead costs of Y $8,000 + $1.60x. Estimated manufacturing overhead costs at 10,000 units of production are
a. $24,000.
b. $17,600.
d. $26,000.
c. $16,000.
d. $26,000.
The correct answer and explanation is :
The correct answer is b. $17,600.
Explanation:
The cost function provided by Stanfil Corporation is given as:
[
Y = 8,000 + 1.60x
]
Where:
- ( Y ) represents the total manufacturing overhead cost.
- ( x ) represents the number of units produced.
- The $8,000 is the fixed overhead cost (cost that does not vary with production levels).
- The $1.60 is the variable overhead cost per unit (cost that increases as production increases).
Step-by-Step Calculation:
- Fixed Costs: The fixed overhead cost is $8,000. This remains constant regardless of the number of units produced.
- Variable Costs: The variable cost per unit is $1.60. This means for every unit produced, the cost increases by $1.60.
- Given Data: The number of units produced is 10,000.
- Total Manufacturing Overhead Calculation:
Using the formula for the total cost function, we can plug in the values:
[
Y = 8,000 + 1.60 \times 10,000
]
[
Y = 8,000 + 16,000
]
[
Y = 24,000
]
Thus, the estimated manufacturing overhead costs when producing 10,000 units is $24,000.
Conclusion:
The total cost function calculation provides the manufacturing overhead cost of $24,000 when 10,000 units are produced. Therefore, the answer a. $24,000 is correct.