Question

Dake Corporation's relevant range of activity is 2,800 units to 6,000 units. When it produces and sells 4,400 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	6.95
Direct labor	$	3.00
Variable manufacturing overhead	$	1.70
Fixed manufacturing overhead	$	2.50
Fixed selling expense	$	1.00
Fixed administrative expense	$	0.70
Sales commissions	$	0.80
Variable administrative expense	$	0.70

For financial reporting purposes, the total amount of product costs incurred to make 4,400 units is closest to:

Multiple Choice

• $62,260

• $51,260

• $68,860

• $11,000

Answer 1

· Correct Answer = Option #1: $ 62,260

	Direct materials	$6.95
	Direct Labor	$3.00
	Variable manufacturing overhead	$1.70
	Fixed manufacturing overhead	$2.50
A	Total product cost per unit	$14.15
B	Units produced	4,400
C = A x B	Total amount of product cost	$62,260

Product Cost
Absorption Costing [financial reporting]	Variable Costing [managerial reporting]
Direct material	Direct material
Direct Labor	Direct Labor
Variable manufacturing overhead	Variable manufacturing overhead
Fixed manufacturing overhead applied	-

>Selling, General and administrative expenses (BOTH Variable and Fixed) DO NOT FORM part of product cost.