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 Rent Direct in Units Expense Materials 1,000 $ 5,000 $ 4,000 2,000 5,000 7,200 3,000 8,000 9,000 4,000 8,000 12,000 5,000 8,000 15,000 6,000 8,000 18,000 7,000 8,000 21,000 8,000 8,000 24,000 9,000 10,000 29,300 10,000 10,000 35,000 11,000 10,000 44,000.

Instructions

(a) Diagram the behavior of each cost for output ranging from 1,000 to 11,000 units.

(b) Determine the relevant range of activity for this product.

(c) Calculate the variable costs per unit within the relevant range.

(d) Indicate the fixed cost within the relevant range.AppendixLO1