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
198) 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 manufacturing overhead cost is closest to:
A) $20,500
B) $23,000
C) $18,000
D) $19,250
Answer: A
Explanation:
Total variable manufacturing overhead cost
($1.70 per unit × 5,000 units)
$
8,500
Total fixed manufacturing overhead cost
($3.00 per unit × 4,000 units*)
12,000
Total manufacturing overhead cost (a)
$
20,500
*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 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
199) Wessner Corporation has provided the following information:
Cost per Unit
Cost per Period
Direct materials
$
6.20
Direct labor
$
2.80
Variable manufacturing overhead
$
1.45
Fixed manufacturing overhead
$
12,000
Sales commissions
$
1.00
Variable administrative expense
$
0.55
Fixed selling and administrative expense
$
4,000
If 5,000 units are produced, the total amount of manufacturing overhead cost is closest to:
A) $18,000
B) $19,250
C) $18,625
D) $20,500
Answer: B
Explanation:
Total variable manufacturing overhead cost
($1.45 per unit × 5,000 units)
$
7,250
Total fixed manufacturing overhead cost
12,000
Total manufacturing overhead cost (a)
$
19,250
Difficulty: 1 Easy
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
200) Wessner Corporation has provided the following information:
Cost per Unit
Cost per Period
Direct materials
$
6.20
Direct labor
$
2.80
Variable manufacturing overhead
$
1.45
Fixed manufacturing overhead
$
12,000
Sales commissions
$
1.00
Variable administrative expense
$
0.55
Fixed selling and administrative expense