Exercise 1-7 (20 minutes)

Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows:

Direct Materials $7

Direct Labor $4

Variable manufacturing overhead $1.5

Fixed manufacturing overhead $ 5

Fixed selling expense $3.5

Fixed administrative expense $2.5

Sales commissions $1

Variable administrative expense $0.5

Please, answer the following questions:

The total direct manufacturing cost:

Direct materials per unit $7

Direct labor per unit $4

Direct manufacturing cost per unit (a) $11

Number of units sold (b) 20,000 units

Total direct manufacturing cost (a) (b) $11 x 20,000 = $220,000

None of the manufacturing costs should be treated as indirect costs when the cost object is the Manufacturing Department.

The total indirect manufacturing cost

Variable manufacturing overhead per unit $1.5

Fixed manufacturing overhead per unit $5

Indirect manufacturing cost per unit (a) $6.5

Number of units sold (b) 20,000 units

Total indirect manufacturing cost (a) (b) $6.5 x 20,000 = $130,000

None of the manufacturing costs should be treated as indirect

costs when the cost object is the Manufacturing Department.

If 18,000 units are produced and sold, what is the variable cost per unit produced and sold?

Direct Materials + Direct Labor + Variable manufacturing overhead + Sales Commissions + Variable administrative expense

7+4+1.5+1+0.5= $14.00

the variable cost per unit produced and sold is $14.00

If 18,000 units are produced and sold, what is the total fixed cost and the average fixed manufacturing cost per unit produced?