Question

dake corporations 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 labor	$ 3.50
variable manufacturing overhead	$ 1.40
fixed manufacturing overhead	$ 2.60
fixed selling expense	$ 0.70
fixed administrative expense	$ 0.40
sales commissions	$ 1.50
variable administrative expense	$ 0.45

if 3,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:

multiple choice

• $34,650
• $34,350
• $42,150
• $30,150

Explanation:

Identify direct manufacturing cost components

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

$$ \text{Direct Manufacturing Cost per Unit} = \$6.55 + \$3.50 = \$10.05 $$

Calculate total direct manufacturing cost for 3,000 units

$$ \text{Total Direct Manufacturing Cost} = 3,000 \text{ units} \times \$10.05 \text{ per unit} $$

$$ \text{Total Direct Manufacturing Cost} = \$30,150 $$

Answer:

• $34,650
• $34,350
• $42,150
• $30,150 (Correct answer)