Determine the relevant range of activity for the product

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Reference no: EM13889327

Shingle Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below.

Output in Units

Rent Expense

Direct Materials

1,000

$5,000

$4,000

2,000

5,000

7,200

3,000

8,000

9,000

4,000

8,000

12,000

5,000

8,000

15,000

6,000

8,000

18,000

7,000

8,000

21,000

8,000

8,000

24,000

9,000

10,000

29,300

10,000

10,000

35,000

11,000

10,000

44,000

Instructions

(a) Diagram the behavior of each cost for output ranging from 1,000 to 11,000 units.

(b) Determine the relevant range of activity for this product.

(c) Calculate the variable costs per unit within the relevant range.

(d) Indicate the fixed cost within the relevant range.

Reference no: EM13889327

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