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Kozy Enterprises

Price: $2.50


Kozy 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 in Units Rent Expense Direct Materials
1,000 $5,000 $4,000
2,000 5,000 6,000
3,000 5,000 7,800
4,000 7,000 8,000
5,000 7,000 10,000
6,000 7,000 12,000
7,000 7,000 14,000
8,000 7,000 16,000
9,000 7,000 18,000
10,000 10,000 23,000
11,000 10,000 28,000
12,000 10,000 36,000

(a) Determine the relevant range of activity for this product.
(b) Calculate the variable costs per unit within the relevant range.
(c) Indicate the fixed cost within the relevant range.

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