Rhome Corporation\'s relevant range of activity is 2,000 units to 6,000 units. W

Question

Rhome 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:

If 5,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to:

Multiple Choice

$18,000

$12,000

$13,500

$15,000

Average Cost per Unit Direct materials $ 5.40 Direct labor $ 3.55 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 3.00 Fixed selling expense $ 0.60 Fixed administrative expense $ 0.40 Sales commissions $ 1.00 Variable administrative expense $ 0.40

Explanation / Answer

ANS (b)

AVERAGE COST PER UNIT (FIXED MANUFACTURING OVERHEAD) = $3

NUMBER OF UNITS = 4000 UNITS

TOTAL AMOUNT OF FIXED MANUFACTURING COST = $3 * 4000 UNITS = $12000

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