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Dake Corporation's relevant range of activity is 4,500 units to 8,500 units. When it produces and sells 6,500 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials $6.40
Direct labor $3.50
Variable manufacturing overhead $2.00
Fixed manufacturing overhead $2.20
Fixed selling expense $0.90
Fixed administrative expense $0.60
Sales commissions $0.70
Variable administrative expense $0.60
Question 1: If 5,500 units are produced, the total amount of direct manufacturing cost incurred is closest to
Using notions such as fixed costs per unit, and other management accounting concepts, explain this apparent paradox. What is the actual best approach?
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