Difficulty: 2 Medium
Topic: Cost Classifications for Assigning Costs to Cost Objects
Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
156) Dake 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
$
6.55
Direct labor
$
3.50
Variable manufacturing overhead
$
1.40
Fixed manufacturing overhead
$
2.60
Fixed selling expense
$
0.70
Fixed administrative expense
$
0.40
Sales commissions
$
1.50
Variable administrative expense
$
0.45
For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:
A) $56,200
B) $45,800
C) $60,200
D) $10,400
Answer: A
Explanation:
Direct materials
$
6.55
Direct labor
3.50
Variable manufacturing overhead
1.40
Variable manufacturing cost per unit
$
11.45
Total variable manufacturing cost
($11.45 per unit × 4,000 units produced)
$
45,800
Total fixed manufacturing overhead cost
($2.60 per unit × 4,000 units produced)
10,400
Total product (manufacturing) cost
$
56,200
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 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
157) Dake 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
$
6.55
Direct labor
$
3.50
Variable manufacturing overhead
$
1.40
Fixed manufacturing overhead
$
2.60
Fixed selling expense
$
0.70
Fixed administrative expense
$
0.40
Sales commissions
$
1.50
Variable administrative expense
$
0.45
For financial reporting purposes, the total amount of period costs incurred to sell 4,000 units is closest to:
A) $7,800
B) $8,100
C) $4,400
D) $12,200
Answer: D
Explanation:
Sales commissions
$
1.50
Variable administrative expense
0.45
Variable selling and administrative expense per unit
$
1.95
Total variable selling and administrative expense
($1.95 per unit × 4,000 units sold)
$
7,800
Total fixed selling and administrative expense
($0.70 per unit × 4,000 units + $0.40 per unit × 4,000 units)
4,400
Total period (nonmanufacturing) cost
$
12,200
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 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
158) Dake 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
$
6.55
Direct labor
$
3.50
Variable manufacturing overhead
$
1.40
Fixed manufacturing overhead
$
2.60
Fixed selling expense