Average Cost per Unit
Direct materials
$
5.50
Direct labor
$
3.90
Variable manufacturing overhead
$
1.30
Fixed manufacturing overhead
$
13.50
Fixed selling expense
$
2.25
Fixed administrative expense
$
1.80
Sales commissions
$
0.50
Variable administrative expense
$
0.45
If 10,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to:
A) $128,250
B) $121,500
C) $148,500
D) $135,000
Answer: B
Explanation:
Fixed manufacturing overhead per unit
$
13.50
Number of units produced*
9,000
Total fixed manufacturing overhead cost
$
121,500
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed manufacturing overhead cost by 9,000 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
193) Fasheh 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:
Average Cost per Unit
Direct materials
$
5.50
Direct labor
$
3.90
Variable manufacturing overhead
$
1.30
Fixed manufacturing overhead
$
13.50
Fixed selling expense
$
2.25
Fixed administrative expense
$
1.80
Sales commissions
$
0.50
Variable administrative expense
$
0.45
If 10,000 units are produced, the total amount of manufacturing overhead cost is closest to:
A) $180,500
B) $134,500
C) $157,500
D) $146,000
Answer: B
Explanation:
Total variable manufacturing overhead cost
($1.30 per unit × 10,000 units)
$
13,000
Total fixed manufacturing overhead cost
($13.50 per unit × 9,000 units*)
121,500
Total manufacturing overhead cost
$
134,500
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed manufacturing overhead cost by 9,000 units.
Difficulty: 2 Medium
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 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
194) 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:
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
If 5,000 units are sold, the variable cost per unit sold is closest to:
A) $13.65
B) $10.65
C) $16.05
D) $12.05
Answer: D
Explanation:
Direct materials
$
5.40
Direct labor
3.55
Variable manufacturing overhead
1.70
Sales commissions
1.00
Variable administrative expense
0.40
Variable cost per unit sold
$
12.05
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.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement