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:

Instructions
(a) Diagram the behaviour of each cost for output ranging from 1,000 to 12,000 units.
(b) Determine the relevant range of activity for this product.
(c) Calculate the variable cost per unit within the relevant range.
(d) Indicate the fixed cost within the relevant range.

Output in Units 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 Rent Expense $5,000 5,000 5,000 7,000 7,000 7,000 7,000 7,000 7,000 10,000 10,000 10,000 Direct Materials $4,000 6,000 7,800 8,000 10,000 12,000 14,000 16,000 18,000 23,000 28,000 36,000