Question

Kubin Company’s relevant range of production is 30,000 to 35,000 units. When it produces and sells 32,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 9.00 Direct labor $ 6.00 Variable manufacturing overhead $ 3.50 Fixed manufacturing overhead $ 7.00 Fixed selling expense $ 5.50 Fixed administrative expense $ 4.50 Sales commissions $ 3.00 Variable administrative expense $ 2.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 32,500 units? b. What is the total indirect manufacturing cost incurred to make 32,500 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 32,500 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department? 3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $146,250 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. a. When the company sells 32,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 32,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

• Required 1
• Required 2
• Required 3

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 32,500 units? (Round per unit values to 2 decimal places.)

b. What is the total indirect manufacturing cost incurred to make 32,500 units? (Round per unit values to 2 decimal places.)

	1a. Direct materials per unit Direct labor per unit Direct manufacturing cost per unit $0.00 Number of units sold Total direct manufacturing cost $0 1b. Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Indirect manufacturing cost per unit $0.00 Number of units sold Total indirect manufacturing cost $0

2. Assume the cost object is the Manufacturing Department and that its total output is 32,500 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department? (Round per unit values to 2 decimal places.)

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

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	2a. Direct materials per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Total manufacturing cost per unit $0.00 Number of units sold Total direct costs $0 2b. Total indirect costs

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $146,250 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.

a. When the company sells 32,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? (Round per unit value to 2 decimal places.)

b. When the company sells 32,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

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	3a. Sales commissions per unit Number of units sold Total sales commission $0 Fixed portion of sales representatives’ compensation Total direct selling expense $0 3b. The total indirect selling expense

Answer 1

1a.	Direct materials per unit	9
	Direct labor per unit	6
	Direct manufacturing cost per unit	$15.00
	Number of units sold	32500
	Total direct manufacturing cost	$487500
1b.	Variable manufacturing overhead per unit	3.50
	Fixed manufacturing overhead per unit	7.00
	Indirect manufacturing cost per unit	$10.50
	Number of units sold	32500
	Total indirect manufacturing cost	$341250

2a.	Direct materials per unit	9
	Direct labor per unit	6
	Variable manufacturing overhead per unit	3.50
	Fixed manufacturing overhead per unit	7.00
	Total manufacturing cost per unit	$25.50
	Number of units sold	32500
	Total direct costs	$828750
2b.	Total indirect costs	$0

None of the manufacturing costs should be treated as indirect costs when the cost object is the Manufacturing Department

3a.	Sales commissions per unit	3
	Number of units sold	32500
	Total sales commission	$97500
	Fixed portion of sales representatives’ compensation	60000
	Total direct selling expense	$157500
3b.	The total indirect selling expense	$60000

Total fixed portion of the sales representatives’ compensation = Total fixed selling expense - Advertising expenditures = (5.50*37500) – 146250 = $60000

Advertising expenditures cannot be traced to specific sales representatives.