Question

The following data pertains to activity and costs for two months: June July Activity level in units 10,000 11,000 Direct materials $ 17,000 $ ? Fixed factory rent 21,000 ? Other production costs 20,000 ? Total cost $ 58,000 $ 61,300 Assuming that these activity levels are within the relevant range, the other production costs for July were: (Round intermediate calculations to 2 decimal places.)

Answer 1

The correct answer is $21,600.

Step-by-step explanation:

According to the scenario, the computation can be done as follows:

First we find the direct material per unit:

Direct material / unit = Total cost / Units

=$17,000/10,000

=$1.7 per unit

So, Direct material cost for 11,000 units = 11,000 × $1.7 = $18,700

Since factory rent is a fixed cost, so it remain same as June month = $21,000

So, we can calculate the other production cost by using following formula:

Other production cost = Total cost - Direct material cost - Factory rent

= $61,300 - $18,700 - $21,000

= $21,600

Hence, other production cost for July month is $21,600.