Question

Company’s relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows:

	Average Cost Per Unit
Direct materials	$	5.90
Direct labor	$	3.40
Variable manufacturing overhead	$	1.60
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	2.90
Fixed administrative expense	$	2.20
Sales commissions	$	1.20
Variable administrative expense	$	0.45

5. If 8,000 units are produced and sold, what is the total amount of variable costs related to the units produced and sold? (Do not round intermediate calculations.)

6. If 12,500 units are produced and sold, what is the total amount of variable costs related to the units produced and sold? (Do not round intermediate calculations.)

7. If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?

Answer 1

• Working

Direct materials	$5.90
Direct Labor	$3.40
Variable manufacturing overhead	$1.60
Sales Commission	$1.20
Variable adminsitrative expense	$0.45
Total Variable cost per unit	$12.55

• Requirement 5

Total amount of variable cost related to 8000 units = 8000 units x $ 12.55 = $ 100,400

• Requirement 6
  Total amount of variable cost related to 12500 units = 12500 units x $ 12.55 = $ 156,875
• Requirement 7
  Average fixed manufacturing cost per unit = (10000 units x $ 4 per unit fixed manufacturing overhead) / 8000 units
  = 40000 / 8000
  = $ 5.00 per unit.