Question

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:

	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

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

2. If 22,000 units are produced and sold, what is the variable cost per unit produced and sold?

3. If 18,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

4. If 22,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

5. If 18,000 units are produced, what is the average fixed manufacturing cost per unit produced?

6. If 22,000 units are produced, what is the average fixed manufacturing cost per unit produced?

7. If 18,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production?

8. If 22,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production?

Answer 1

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Kubin Co.
Calculation of variable cost per unit	Amount $	Note
Direct materials	7.00
Direct Labor	4.00
Variable manufacturing overhead	1.50
Sales commissions	1.00
Variable administrative expense	0.50
Variable cost per unit	14.00	A
Note
Variable cost per unit remains same at any level of production.
Answer 1
If 18,000 units are produced and sold, then variable cost per unit produced and sold is $ 14.
Answer 2
If 22,000 units are produced and sold, then variable cost per unit produced and sold is $ 14.
Calculation of total variable cost			Note
Units produced and sold	18,000.00	22,000.00	B
Variable cost per unit	14.00	14.00	See A
Total Variable cost	252,000.00	308,000.00	C=B*A
Answer 3
If 18,000 units are produced and sold, then total variable cost is $ 252,000.
Answer 4
If 22,000 units are produced and sold, then total variable cost is $308,000.
Calculation of fixed manufacturing cost	Amount $		Note
Fixed manufacturing overhead	5.00		D
Units produced	20,000.00		E
Fixed manufacturing cost	100,000.00		F=D*E
Note
Total fixed manufacturing cost remains same at any level of production.
Answer 5			Note
Fixed manufacturing cost	100,000.00		See F
Units produced and sold	18,000.00		G
Average fixed manufacturing cost per unit	5.56		H=F/G
Answer 6			Note
Fixed manufacturing cost	100,000.00		See F
Units produced and sold	22,000.00		I
Average fixed manufacturing cost per unit	4.55		J=F/I
Answer 7
If 18,000 units are produced then $ 100,000 is the total amount of fixed manufacturing overhead incurred to support this level of production because total fixed manufacturing cost remains same at any level of production.
Answer 8
If 22,000 units are produced then $ 100,000 is the total amount of fixed manufacturing overhead incurred to support this level of production because total fixed manufacturing cost remains same at any level of production.