Question

Rhome Corporation's relevagt 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: 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 $ 5.40 $ 3.55 $ 1.70 $ 3.60 $ 0.60 $ 0.40 $ 1.00 $ 0.40 1 5,000 units are produced, the average fixed manufacturing cost per unit produced is closest to Multiple Choice o $2.40 o $300 o $375 $270

Answer 1

1. The correct option is

$2.4

Working:

Fixed cost when 4000 units produced = 4000 * $3 = $12000

Fixed cost when 5000 units produced = $12000

Average fixed cost per unit when 5000 units produced = 12000 / 5000 = $ 2.4 per unit

2. The correct option is

$25000

Working :

Contribution Margin = Sales Revenue - Variable Cost of Goods sold

Contribution Margin = $50,000- 20,000 - 5000 = $25,000