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: 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 If 5,000 units are produced, the average fixed manufacturing cost per unit produced is closest to: Multiple Choice $3.00 $2.70 $2.40 $3.75

Answer 1

Answer:

$2.40

Explanation:

The computation of the fixed manufacturing cost per unit is shown below:

= Total fixed manufacturing overhead cost ÷ number of units produced

= 4,000 units × $3 ÷ 5,000 units

= $12,000 ÷ 5,000 units  

= $2.40

Hence, the correct option is last i.e. $2.40

We simply applied the above formula

All other things should be ignored