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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
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:
Categories | Average Cost per Unit |
---|---|
Direct materials | $7.00 |
Direct labor | $4.00 |
Variable manufacturing overhead | $1.50 |
Fixed manufacturing overhead | $5.00 |
Fixed selling expense | $3.50 |
Fixed administrative expense | $2.50 |
Sales commissions | $1.00 |
Variable administrative expense | $0.50 |
Required:
- Assume the cost object is units of production:
- What is the total direct manufacturing cost incurred to make 20,000 units?
- What is the total indirect manufacturing cost incurred to make 20,000 units?
- Assume the cost object is the Manufacturing Department and that its total output is 20,000 units.
- How much total manufacturing cost is directly traceable to the Manufacturing Department?
- How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?
- Assume the cost object is the company's various sales representatives. Furthermore, assume that the company spent $50,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives' compensation.
- When the company sells 20,000 units, what is the total direct selling expense that can be readily traced to individual sales representatives?
- When the company sells 20,000 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?
- Are Kubin's administrative expenses always going to be treated as indirect costs in its internal management reports?
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