Question

Dake Corporation's relevant range of activity is 4,000 units to 7,500 units. When it produces and sells 5,750 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	7.10
Direct labor	$	3.30
Variable manufacturing overhead	$	1.90
Fixed manufacturing overhead	$	3.60
Fixed selling expense	$	0.80
Fixed administrative expense	$	0.50
Sales commissions	$	0.60
Variable administrative expense	$	0.50

If 4,750 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Answer 1

Here all information are directly given

Average cost per unit of variable manufacturing overhead is 1.90

Sales units produced =4750

So total amount of indirect manufacturing cost = 4750*1.90 =9025

Note: Here variable manufacturing overhead and indirect manufacturing cost are one and same.

Variable manufacturing overhead is the cost of operating a business, which fluctuates with manufacturing activity. As production output increases or decreases, variable overhead moves in tandem