Question
Kubin Companys 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
Kubin Companys 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:
Amount 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 |
1a. The total direct manufacturing cost incurred is computed as follows:
Direct materials per unit.............................. |
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Direct labor per unit.................................... |
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Direct manufacturing cost per unit (a)......... |
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Number of units sold (b)............................. |
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Total direct manufacturing cost (a) (b)..... |
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1b. The total indirect manufacturing cost incurred is computed as follows:
Variable manufacturing overhead per unit... |
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Fixed manufacturing overhead per unit....... |
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Indirect manufacturing cost per unit (a)...... |
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Number of units sold (b)............................. |
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Total indirect manufacturing cost (a) (b).. |
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Note: The average fixed manufacturing overhead cost per unit of $5.00 is valid for only one level of activity20,000 units produced.
2a. The total manufacturing cost that is directly traceable to the Manufacturing Department is computed as follows:
Direct materials per unit.............................. |
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Direct labor per unit.................................... |
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Variable manufacturing overhead per unit... |
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Fixed manufacturing overhead per unit....... |
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Total manufacturing cost per unit (a)........... |
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Number of units sold (b)............................. |
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Total direct costs (a) (b).......................... |
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2b. None of the manufacturing costs should be treated as indirect costs when the cost object is the Manufacturing Department.
3a. The first step in calculating the total direct selling expense is to determine the fixed portion of the sales representatives compensation as follows:
Fixed selling expense per unit (a)................ |
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Number of units sold (b)............................. |
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Total fixed selling expense (a) (b)............ |
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Total fixed selling expense (a)..................... |
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Advertising expenditures (b)........................ |
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Total fixed portion of the sales representatives compensation (a) (b).... |
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The second step is to calculate the total direct selling expense that is traceable to individual sales representatives as follows:
Sales commissions per unit (a).................... |
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Number of units sold (b)............................. |
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Total sales commission (a) (b)................. |
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Fixed portion of sales representatives compensation........................................... |
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Total direct selling expense.......................... |
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