Kozy Enterprises is considering manufacturing a new product. It projects the cos
ID: 2428100 • Letter: K
Question
Kozy 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 6,000
3,000 5,000 7,800
4,000 7,000 8,000
5,000 7,000 10,000
6,000 7,000 12,000
7,000 7,000 14,000
8,000 7,000 16,000
9,000 7,000 18,000
10,000 10,000 23,000
11,000 10,000 28,000
12,000 10,000 36,000
Determine the relevant range of activity for this product.
1,000-3,0004,000-9,00010,000-12,000
Calculate the variable cost per unit within the relevant range.
$
Indicate the fixed cost within the relevant range.
$
Explanation / Answer
Activity level
varaible cost
1000 to 3000
2.6
4000to 9000
2
10000 to 12000
3
Activity level
Fixed cost
1000 to 3000
5000
4000to 9000
7000
10000 to 12000
10000
Activity level
varaible cost
1000 to 3000
2.6
4000to 9000
2
10000 to 12000
3
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