Determine the relevant range of activity for this product.
Calculate the variable costs per unit within the relevant range.
Indicate the fixed cost within the relevant range.
Homework Answers
Answer:
(1) Relevant range if output is that range of output within with average variable cost remains constant. Here, average variable cost (= Direct material cost / Output) is constant at $2.4 within 3,000 to 8,000 units, so this is the relevant range.
(2) variable cost per unit = $7,200 / 3,000 = $2.40 per unit
(3) Fixed cost within relevant range = $8,464
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