195) 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 total variable cost is closest to:
A) $53,250
B) $68,250
C) $80,250
D) $60,250
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
Variable cost per unit sold (a)
$
12.05
Number of units sold (b)
5,000
Total variable costs (a) × (b)
$
60,250
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
196) 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 produced, the average fixed manufacturing cost per unit produced is closest to:
A) $3.75
B) $2.40
C) $2.70
D) $3.00
Answer: B
Explanation:
Total fixed manufacturing overhead cost
($3.00 per unit × 4,000 units*) (a)
$
12,000
Number of units produced (b)
5,000
Average fixed manufacturing cost per unit produced (a) ÷ (b)
$
2.40
*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
197) 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 produced, the total amount of fixed manufacturing cost incurred is closest to:
A) $13,500
B) $18,000
C) $12,000
D) $15,000
Answer: C
Explanation:
Fixed manufacturing overhead per unit
$
3.00
Number of units produced*
4,000
Total fixed manufacturing overhead cost
$
12,000
*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