Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
142) Schonhardt 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:
Average Cost per Unit
Direct materials
$
7.15
Direct labor
$
3.40
Variable manufacturing overhead
$
1.35
Fixed manufacturing overhead
$
2.80
Fixed selling expense
$
0.70
Fixed administrative expense
$
0.40
Sales commissions
$
0.50
Variable administrative expense
$
0.40
If 5,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to:
A) $16,800
B) $14,000
C) $12,600
D) $11,200
Answer: D
Explanation:
Fixed manufacturing overhead per unit
$
2.80
Number of units produced*
4,000
Total fixed manufacturing overhead cost
$
11,200
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed manufacturing overhead cost by 4,000 units.
Difficulty: 2 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
143) At a volume of 5,000 units, Pwerson Company incurred $32,000 in factory overhead costs, including $14,000 in fixed costs. If volume increases to 6,000 units and both 5,000 units and 6,000 units are within the relevant range, then the company would expect to incur total factory overhead costs of: (Round intermediate calculations to 2 decimal places.)
A) $35,600
B) $21,600
C) $32,000
D) $18,000
Answer: A
Explanation: Total cost = Total fixed cost + Total variable cost
$32,000 = $14,000 + Total variable cost
Total variable cost = $32,000 – $14,000 = $18,000
Variable cost per unit = $18,000 ÷ 5,000 units = $3.60 per unit
Total cost = Total fixed cost + Total variable cost
= $14,000 + ($3.60 per unit × 6,000 units)
= $14,000 + $21,600 = $35,600
Difficulty: 2 Medium
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
144) Waldhauser Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials
$
6.10
Direct labor
$
3.45
Variable manufacturing overhead
$
1.75
Fixed manufacturing overhead
$
3.30
Fixed selling expense
$
0.75
Fixed administrative expense
$
0.60
Sales commissions
$
1.50
Variable administrative expense
$
0.45
If 6,000 units are sold, the total variable cost is closest to:
A) $79,500
B) $107,400
C) $67,800
D) $87,600
Answer: A
Explanation:
Direct materials
$
6.10
Direct labor
$
3.45
Variable manufacturing overhead
$
1.75
Sales commissions
$
1.50
Variable administrative expense
$
0.45
Variable cost per unit sold
$
13.25
Variable cost per unit sold (a)
$
13.25
Number of units sold (b)
6,000
Total variable costs (a) × (b)
$
79,500
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.