Homework SourseRhome Corporations relevant range of activity is 2000 units
Rhome Corporation\'s relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows:
If 5,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to:
Multiple Choice
$18,000
$12,000
$13,500
$15,000
| Average Cost per Unit | ||
| Direct materials | $ | 5.40 |
| Direct labor | $ | 3.55 |
| Variable manufacturing overhead | $ | 1.70 |
| Fixed manufacturing overhead | $ | 3.00 |
| Fixed selling expense | $ | 0.60 |
| Fixed administrative expense | $ | 0.40 |
| Sales commissions | $ | 1.00 |
| Variable administrative expense | $ | 0.40 |
Solution
ANS (b)
AVERAGE COST PER UNIT (FIXED MANUFACTURING OVERHEAD) = $3
NUMBER OF UNITS = 4000 UNITS
TOTAL AMOUNT OF FIXED MANUFACTURING COST = $3 * 4000 UNITS = $12000
