Wheel and Tire Manufacturing currently produces 1,000 tires per month

Accounting Dec 24, 2020

Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers Direct materials $20 Direct manufacturing labor 3 Variable manufacturing overhead 6 Fixed manufacturing overhead 10 The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires.

Expert Solution

Computation of the total cost:-

Total cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= ($20*2000)+($3*2000)+(6*2000)+($10*1000)

= $40,000 + $6,000 + $12,000 + $10,000

= $68,000

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