Question

Schonhardt 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: $7.15
Direct labor: $3.40
Variable manufacturing overhead: $1.35
Fixed manufacturing overhead: $2.80
Fixed selling expense: $ 0.70
Fixed administrative expense: $0.40
Sales commissions: $0.50
Variable administrative expense: $0.40

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

Answer 1

Answer:

If 5,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to: $11,200

Explanation:

When Schonhardt Corporation produces and sells 4,000 units. The company  has Fixed manufacturing overhead cost of $2.80 per unit.

Total Fixed manufacturing overhead cost = $2.80 x 4,000 = $11,200

5,000 units belong Schonhardt Corporation's relevant range of activity (2,000 units to 6,000 units). Therefore, total Fixed manufacturing overhead cost does not change.

Total Fixed manufacturing overhead cost if 5,000 units are produced = $11,200