In: Accounting
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
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 |