Question

Schonhardt Corporation's relevant range of activity is 4,700 units to 10,500 units. When it produces and sells 7,600 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 7.50 Direct labor $ 4.00 Variable manufacturing overhead $ 1.55 Fixed manufacturing overhead $ 2.50 Fixed selling expense $ 1.15 Fixed administrative expense $ 0.85 Sales commissions $ 0.95 Variable administrative expense $ 0.85 If 9,500 units are produced, the total amount of fixed manufacturing cost incurred is closest to

Answer 1

If 9,500 units are produced, the total amount of fixed manufacturing cost incurred is closest to $19,000

What is a fixed cost?

A fixed cost is the portiion of production costs that does not vary within a relevant range. Since Schonhardt Corporation's relevant range of activity is 4,700 units to 10,500 units, when it produces 9,500 units, its fixed cost does not change in total from when it produces 7,600 units.

Data and Calculations:

Relevant range of activity = 4,700 to 10,500 units

Average production and sales units = 7,600 units

Average costs per unit:

Direct materials $ 7.50

Direct labor $ 4.00

Variable manufacturing overhead $ 1.55

Fixed manufacturing overhead $ 2.50

Fixed selling expense $ 1.15

Fixed administrative expense $ 0.85

Sales commissions $ 0.95

Variable administrative expense $ 0.85

Fixed manufacturing overhead $ 2.50

Fixed selling expense                  $ 1.15

Fixed administrative expense   $ 0.85

Total fixed costs per unit            $4.50

Thus, if 9,500 units are produced, the total amount of fixed manufacturing cost incurred is closest to $19,000 ($2.50 x 7,600).

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