Question

Dake Corporation's relevant range of activity is 3,100 units to 6,500 units. When it produces and sells 4,800 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit $7.00 $3.10 $1.75 $3.00 $1.05 $0.75 $0.85 $0.75 If 3,800 units are produced, the total amount of direct manufacturing cost incurred is closest to:

Answer 1

Total direct manufacturing cost = Direct material + Direct labor + variable manufacturing overhead

= ( $7 X 3800units) + ($3.10 X 3800 units ) +($1.75 X 3800 units )

=$26600 +$11780 +$6650

=$45030 (Option D is correct)

Direct manufacturing are those cost which direct incurred on the production ​​​​​​of units . It becomes the part of produced units.

Fixed manufacturing overhead is not direct cost because these are indirect in nature which incurred in factory to support the production like depreciation on factory equipment/machines/furniture, factory building insurance etc .therefore these are not included in direct cost.

Selling and administration are not manufacturing cost

Note: if you have any doubt please ask . Thanks ?