1. Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows:

	Average Cost Per Unit
Direct materials	$ 5.70
Direct labor	$ 3.20
Variable manufacturing overhead	$ 1.60
Fixed manufacturing overhead	$ 4.00
Fixed selling expense	$ 2.70
Fixed administrative expense	$ 2.10
Sales commissions	$ 1.10
Variable administrative expense	$ 0.55

If 12,500 units are produced and sold, what is the variable cost per unit produced and sold?

Note: Round your answer to 2 decimal places.

If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?

Note: Round your answer to 2 decimal places.

If 8,000 units are produced, what is the total manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per-unit basis?

Note: Round your "per unit" answer to 2 decimal places.

1. Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $2,000 and the variable cost per cup of coffee served is $0.66.

Required:

1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity.
2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases?

Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity.

Note: Round the "Average cost per cup of coffee served" to 3 decimal places.

	Cups of Coffee Served in a Week
2,500	2,600	2,700
Fixed cost
Variable cost
Total cost	$0	$0	$0
Average cost per cup of coffee served

Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases?

1. Cherokee Incorporated is a merchandiser that provided the following information:

	Amount
Number of units sold	12,000
Selling price per unit	$ 16
Variable selling expense per unit	$ 1
Variable administrative expense per unit	$ 1
Total fixed selling expense	$ 18,000
Total fixed administrative expense	$ 14,000
Beginning merchandise inventory	$ 10,000
Ending merchandise inventory	$ 25,000
Merchandise purchases	$ 86,000

Required:

1. Prepare a traditional income statement.
2. Prepare a contribution format income statement.

Cherokee, Incorporated
Traditional Income Statement
Selling and administrative expenses:

Cherokee, Incorporated
Contribution Format Income Statement
Variable expenses:
Fixed expenses:

1. Kubin Company's relevant range of production is 14,000 to 20,500 units. When it produces and sells 17,250 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$ 7.50
Direct labor	$ 4.50
Variable manufacturing overhead	$ 2.00
Fixed manufacturing overhead	$ 5.50
Fixed selling expense	$ 4.00
Fixed administrative expense	$ 3.00
Sales commissions	$ 1.50
Variable administrative expense	$ 1.00

Required:

1. What is the incremental manufacturing cost incurred if the company increases production from 17,250 to 17,251 units?
2. What is the incremental cost incurred if the company increases productionandsales from 17,250 to 17,251 units?
3. Assume Kubin Company produced 17,250 units and expects to sell 17,000 of them. If a new customer unexpectedly emerges and expresses interest in buying the 250 extra units that have been produced by the company and would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer?
4. Assume Kubin Company produced 17,250 units and expects to sell 17,000 of them. If a new customer unexpectedly emerges and expresses interest in buying the 250 extra units that have been produced by the company and would otherwise remain unsold, what incremental selling and administrative cost per unit is incurred to sell these units to the customer?

1. The following cost data pertain to the operations of Montgomery Department Stores, Incorporated, for the month of July.

Corporate legal office salaries	$ 65,600
Apparel Department cost of salesEvendale Store	$ 107,100
Corporate headquarters building lease	$ 58,600
Store manager's salaryEvendale Store	$ 19,900
Apparel Department sales commissionEvendale Store	$ 11,600
Store utilitiesEvendale Store	$ 12,200
Apparel Department manager's salaryEvendale Store	$ 8,050
Central warehouse lease cost	$ 24,600
Janitorial costsEvendale Store	$ 11,500

The Evendale Store is one of many stores owned and operated by the company. The Apparel Department is one of many departments at the Evendale Store. The central warehouse serves all of the company's stores.

Required:

1. What are the total direct costs of the Apparel Department?
2. What are the total direct costs of the Evendale Store?
3. Of the Apparel Department's direct costs, how much are variable with respect to total departmental sales?

1. Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for themonth:

Direct materials		$ 88,000
Direct labor		$ 44,500
Variable manufacturing overhead	$ 22,600
Fixed manufacturing overhead	33,700
Total manufacturing overhead		$ 56,300
Variable selling expense	$ 15,800
Fixed selling expense	25,600
Total selling expense		$ 41,400
Variable administrative expense	$ 5,900
Fixed administrative expense	28,800
Total administrative expense		$ 34,700

Required:

1. With respect to cost classifications for preparing financial statements:
   1. What is the total product cost?
   2. What is the total period cost?
2. With respect to cost classifications for assigning costs to cost objects:
   1. What is the total direct manufacturing cost?
   2. What is the total indirect manufacturing cost?
3. With respect to cost classifications for manufacturers:
   1. What is the total manufacturing cost?
   2. What is the total nonmanufacturing cost?
   3. What are the total conversion cost and prime cost?
4. With respect to cost classifications for predicting cost behavior:
   1. What is the total variable manufacturing cost?
   2. What is the total fixed cost for the company as a whole?
   3. What is the variable cost per unit produced and sold?
5. With respect to cost classifications for decision making:
   1. If Dozier had produced 1,001 units instead of 1,000 units, how much incremental manufacturing cost would it have incurred to make the additional unit?

Multiple Choice

1. Which of the following statements concerning direct and indirect costs is NOT true?
2. Whether a particular cost is classified as direct or indirect does not depend on the cost object.
3. A direct cost is one that can be easily traced to the particular cost object.
4. The factory manager's salary would be classified as an indirect cost of producing one unit of product.
5. A particular cost may be direct or indirect, depending on the cost object.

1. Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?
   1. The cost of the glue in a chair.

1. The amount paid to the individual who stains a chair.
2. The workman's compensation insurance of the supervisor who oversees production.
3. The factory utilities of the department in which production takes place.

1. Which of the following is NOT a period cost?
2. Depreciation of factory maintenance equipment.
3. Salary of a clerk who handles customer billing.
4. Insurance on a company showroom where customers can view new products.
5. Cost of a seminar concerning tax law updates that was attended by the company's controller.

1. Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?
2. Property taxes on a headquarters building.
3. Legal department salaries.
4. Cost of leasing the company's mainframe computer.
5. Production supplies.

5. Which costs will change with a decrease in activity within the relevant range?

A. Total fixed costs and total variable cost.

B. Unit fixed costs and total variable cost.

C.Unit variable cost and unit fixed cost.

D.Unit fixed cost and total fixed cost.