The cost function for total costs is FC + (VC per unit × P). Since the expected fixed cost per unit of $15 was based on a planned activity level of 8,000 units, expected fixed manufacturing overhead cost must have been $120,000 ($15 × 8,000 units). That amount will not change with changes in the production level as long as production remains within the relevant range. Variable costs are $55 per unit ($20 + $25 + $10). The cost function for total costs is FC + (VC per unit × P). Total manufacturing cost expected to be incurred to manufacture 9,000 units is $120,000 + ($55 × 9,000) = $615,000).
This is the total cost per unit at an activity level of 8,000 multiplied by 9,000. This does not take into account the nature of the fixed cost component of the total cost per unit.
This is total manufacturing cost at a production level of 8,000 units. The question asks for the total manufacturing cost at a level 9,000 units.
This is total variable cost per unit multiplied by 8,000 units plus fixed manufacturing cost per unit at the level of 8,000 units multiplied by 9,000 units: ($55 × 8,000) + ($15 × 9,000) = $575,000. To find the total manufacturing cost expected to be incurred at a production level of 9,000 units, we need to multiply the total variable cost per unit by the 9,000 units to be produced; then we need to add that amount to total expected fixed costs to be incurred. Total expected fixed costs to be incurred are not $15 × 9,000, because total fixed costs do not increase with increases in production as long as production remains within the relevant range.
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