Arman Corporation's Relevant Range of Activity Is 3,000 Units to 7,000

question 110

Essay

Arman Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows:
Required:
a. If 6,000 units are produced, what is the total amount of fixed manufacturing cost incurred?
b. If 6,000 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis?
c. If 4,000 units are produced, what is the total amount of direct manufacturing cost incurred?
d. If 4,000 units are produced, what is the total amount of indirect manufacturing cost incurred?

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Definitions:

Domestic Opportunity Cost

The cost of forgoing the next best alternative use of a country's resources when choosing to produce a particular good or service.

Domestic Supply

The total amount of a good or service that is available from domestic producers within a country, influencing national prices and availability.

Domestic Demand

The overall desire for merchandise and services within a nation's boundaries.

Price

The amount of money required to purchase a good or service, determined by supply and demand dynamics within the market.