Question

mccaskell corporations relevant range of activity is 7,000 units to 11,000 units. when it produces and sells 9,000 units, its average costs per unit are as follows:

	average cost per unit
direct labor	\\$3.65
variable manufacturing overhead	\\$1.75
fixed manufacturing overhead	\\$9.90
fixed selling expense	\\$2.25
fixed administrative expense	\\$1.80
sales commissions	\\$1.00
variable administrative expense	\\$0.50

if 8,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:

multiple choice

• \\$87,600
• \\$172,800
• \\$79,600
• \\$93,600

Explanation:

Identify direct manufacturing cost components

$$ \text{Direct Manufacturing Cost per Unit} = \text{Direct Materials} + \text{Direct Labor} $$

$$ \text{Direct Manufacturing Cost per Unit} = \$6.30 + \$3.65 = \$9.95 $$

Calculate total direct manufacturing cost for 8,000 units

$$ \text{Total Direct Manufacturing Cost} = 8,000 \times \$9.95 $$

$$ \text{Total Direct Manufacturing Cost} = \$79,600 $$

Answer:

• (A) $87,600
• (B) $172,800
• (C) $79,600 (Correct answer)
• (D) $93,600