Question & Answer: 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:…..

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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:

 

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:

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 20,000 units?

b. What is the total indirect manufacturing cost incurred to make 20,000 units?

2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

Expert Answer

 

Average Cost per Unit
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
ans 1
Total direct manufacturing cost
No. of units Total
Direct materials 20000 7 140000
Direct labor 20000 4 80000
Total direct manufacturing cost 220000
1b
Total Indirect manufacturing cost No. of units Total
Variable manufacturing overhead 20000 1.5 30000
Fixed manufacturing overhead 20000 5 100000
Total Indirect manufacturing cost 130000
ans 2
No. of units Total
Direct materials 20000 7 140000
Direct labor 20000 4 80000
Variable manufacturing overhead 20000 1.5 30000
total manufacturing cost is directly traceable to the Manufacturing Department 250000
ans 2b
total manufacturing cost is indirectly to the cannot be easily traceable manufacturing Department
Fixed manufacturing overhead 100000
ans 3
Fixed selling expense (20000*3.5)-50000 20000
Sales commissions (1*20000) 20000
Total direct selling expenses
3b) Indirect selling expensess $50,000

 

 

 

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