Varela Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows: For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:

A) $43,400
B) $55,400
C) $59,400
D) $12,000

Question

Varela Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows:

For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:

A) $43,400
B) $55,400
C) $59,400
D) $12,000

Jennifer Morton · Accepted Answer

Final Answer : B, Explanation :  The average cost per unit is given as $13.85 ($55,400 ÷ 4,000 units).To calculate the total amount of product costs incurred, we need to use the formula:Total product costs = (direct materials + direct labor + manufacturing overhead) x number of units produced.However, we are not given the breakdown of costs, so we cannot calculate exact values. Instead, we can estimate the total product costs based on the average cost per unit.At 4,000 units, the total product costs would be:$13.85 x 4,000 = $55,400Therefore, the closest answer choice is B) $55,400.

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