Question

Dake Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 6.55 Direct labor $ 3.50 Variable manufacturing overhead $ 1.40 Fixed manufacturing overhead $ 2.60 Fixed selling expense $ 0.70 Fixed administrative expense $ 0.40 Sales commissions $ 1.50 Variable administrative expense $ 0.45 If 3,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

When it produces and sells 4,000 units, its average costs per unit are as follows:

Variable manufacturing overhead $1.40

Fixed manufacturing overhead $ 2.60

Units produced= 3,000

To calculate the unitary indirect manufacturing cost, you can use two different methods. The variable method only uses the variable manufacturing overhead. The absorption method uses the total unitary overhead.

Total fixed overhead= 2.6*4,000= 10,400

Variable costing method:

Unitary indirect manufacturing cost= $1.4

Absorption costing method:

Unitary fixed overhead= 10,400/3,000= $3.47

Unitary indirect manufacturing cost= 1.4 + 3.47= $4.87