Homework SourseLandmann Corporations relevant range of activity is 7000 uni
Landmann Corporation\'s relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows:
For financial reporting purposes, the total amount of product costs incurred to make 9,000 units is closest to:
Multiple Choice
$121,500
$227,700
$236,700
$106,200
| Average Cost per Unit | |||
| Direct materials | $ | 6.35 | |
| Direct labor | $ | 4.10 | |
| Variable manufacturing overhead | $ | 1.35 | |
| Fixed manufacturing overhead | $ | 13.50 | |
| Fixed selling expense | $ | 2.25 | |
| Fixed administrative expense | $ | 1.80 | |
| Sales commissions | $ | 1.00 | |
| Variable administrative expense | $ | 0.45 | |
Solution
The total amount of product costs incurred to make a product is equal to sum total of all the costs associated to the manufacturing of the product, whether fixed or variable
Since the question has asked about the cost INCURRED IN MAKING 9000 units,
Selling and Administrative Expenses will not be included in the cost since they do not relate to manufacturing of product
Hence, Relevant Cost per unit = 6.35+4.10+1.35+13.50+ = 25.3
And the total amount of product costs incurred to make 9,000 units = 25.3*9000 = 227,700
