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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
12,000
15,000
6,000
18,000
7,000
21,000
24,000
10,000
29,300
35,000
11,000
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.
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