Question: 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.
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 | 7,100 | 5,680 |
| 2,000 | 7,100 | 10,224 |
| 3,000 | 11,360 | 6,000 |
| 4,000 | 11,360 | 8,000 |
| 5,000 | 11,360 | 10,000 |
| 6,000 | 11,360 | 12,000 |
| 7,000 | 11,360 | 14,000 |
| 8,000 | 11,360 | 16,000 |
| 9,000 | 14,200 | 41,606 |
| 10,000 | 14,200 | 49,700 |
| 11,000 | 14,200 | 62,480 |
1. Determine the relevant range of activity for this product.
2. Calculate the variable cost per unit within the relevant range.
3. Indicate the fixed cost within the relevant range.
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