Question

In: Accounting

Kurt Corporation's relevant range of activity is 4,900 units to 5,500 units. When it produces and...

Kurt Corporation's relevant range of activity is 4,900 units to 5,500 units. When it produces and sells 5,200 units, its average costs per unit are as follows:

Average Cost per Unit
Direct materials $ 6.50
Direct labor $ 3.70
Variable manufacturing overhead $ 2.10
Fixed manufacturing overhead $ 3.00
Fixed selling expense $ 1.00
Fixed administrative expense $ 0.70
Sales commissions $ 0.80
Variable administrative expense $ 0.70

If 4,200 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Multiple Choice

  • $15,600

  • $24,420

  • $21,420

  • $8,820

Solutions

Expert Solution

Answer: $24,420

.

.

Fixed cost does not change with the change in production.

So,

The fixed cost incurred to produce 5,200 units = The Fixed cost incurred to produce 4,200 units.

Fixed manufacturing cost per unit when 5,200 units are produced = $3

So,

total fixed manufacturing cost = 5,200 units x $3 = $15,600

The total fixed cost incurred to produce 4,200 units is also $15,600

.

.

Working note - Calculation of total amount of indirect manufacturing cost
Variable manufacturing overhead       [4,200 units x $2.10 per unit] $8,820
Fixed manufacturing overhead            [5,200 units x $3 per unit] $15,600
Total amount of indirect manufacturing cost [$8,820 + $15,600] $24,420

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