Problem - 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.
(Out put (Rent Expense) (Direct Materials) in units)
1,000 $ 6,755 $ 5,404
2,000 6,755 9,727
3,000 10,808 7,200
4,000 10,808 9,600
5,000 10,808 12,000
6,000 10,808 14,400
7,000 10,808 16,800
8,000 10,808 19,200
9,000 13,510 39,584
10,000 13,510 47,285
11,000 13,510 59,444
Determine the relevant range of activity for this product.
Calculate the variable costs per unit within the relevant range.