Question

Shingle Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below. Output in Units Rent Expense Direct Materials 1,000 $ 5,585 $ 4,468 2,000 5,585 8,042 3,000 8,936 7,500 4,000 8,936 10,000 5,000 8,936 12,500 6,000 8,936 15,000 7,000 8,936 17,500 8,000 8,936 20,000 9,000 11,170 32,728 10,000 11,170 39,095 11,000 11,170 49,148 Determine the relevant range of activity for this product. The relevant range of activity for this product 3,000 – 8,000 units eTextbook and Media Calculate the variable costs per unit within the relevant range. (Round answer to 2 decimal places, e.g. 1.25.) Variable costs per unit per unit $ eTextbook and Media Indicate the fixed cost within the relevant range. Fixed cost $

Answer 1

Variable cost per unit $2.50 Working notes: For the relevant range of 3,000 to 8,000 output Units 3,000 8,000 Rent Direct Direct Material expense material cost per unit $8,936 $7,500 $2.50 $7,500/3,000 units $8,936 $20,000 $2.50 $20,500/8,000 units Rent is fixed cost since there is no changes