Millar Company Produces a Single Product Which It Sells for $89

question 81

Multiple Choice

Millar Company produces a single product which it sells for $89 a unit.If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit,which of the below is correct?

• A)The fixed costs amount to $32 per unit at any level of output within a relevant volume range.
• B)The company will break even with a sales volume of $68,400 a month.
• C)An increase in sales volume above $68,400 a month will cause an increase in fixed costs.
• D)The contribution margin per unit of product is $32.

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Definitions:

Traditional Costing

An accounting method that allocates overhead costs to products based on a predetermined rate, often labor or machine hours.

Activity-Based Costing

An accounting method that identifies and assigns costs to specific activities, thereby more accurately reflecting the costs of products or services.

Overhead Rate

The total of indirect costs of production compared to a base activity measure, like labor hours, used to assign costs to products.

Manufacturing Overhead

These are indirect factory-related costs that are incurred when producing a product, such as utility costs, depreciation, and salaries of supervisors.