Question

Chapter 1 The Foundational 15 sconnect LEARNING OBJECTIVES 1-1.1-2. 1-3,1-4,1-5, 1-6 Martinez Camam's relevant range of productos and sells 10,000 units, its are costs per unit are as foll production is 7.500 units to 12.500 units. When it produce Average cost Direct materials Direct labor Variable manufacturing overhead... Fleed manufacturing overhead Freed selling expense...... ** $0 50 Variable administrative expenses Required. For financial accounting purposes, what is the total amount of product costs incurred to make 10.000 units? For financial accounting purposes, what is the total amount of period costs incurred to sell 10,000 units? 3. If 8,000 units are produced and sold, what is the variable cost per unit produced and sold? 4. 12.500 units are produced and sold, what is the variable cost per unit produced and sold? 5. If 8,000 units are produced and sold what is the total amevant of variable costs related to the units produced and sold? 6. If 12.500 units are produced and sold, what is the total amount of variable costs related to the units produced and sold? 7. If 8.000 units are produced, what is the average fixed manufacturing cost per unit produced 8. IF 12.500 units are produced, what is the average fixed manufacturing cost per unit produced 9. If 8.000 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production? 10. IF 12.500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production? 11. If 8,000 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per unit basis? 12. IF 12.500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per unit basis? 13. If the selling price is $22 per unit, what is the contribution margin per unit? 14. If 11.000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production? 15. What incremental manufacturing cost will Martinez incur if it increases production from 10,000 to 10,001 units? Exercises connect EXERCISE 1-1 Identifying Direct and Indirect Costs L01-1 Northwest Hospital is a full-service hospital that provides everything from major surgery emergency room care to outpatient clinics. Required: For each cost incurred at Northwest Hospital, indicate whether it would most likely be a direct or an indirect cost of the specified cost object by placing an X in the appropriate column

Answer 1

1)		Product costs = (Direct Material + Direct Labor + Variable Manufacturing Overhead)* Units + (Fixed Manufacturing Overhead* Units)
	=	(6 + 3.5 + 1.5) * 10000 + (4 * 10000)
	=	$ 150,000
2)		Period costs = (Fixed Selling expense + Fixed admin expense + Sales commission + Variable admin expense)* Units
	=	(3 + 2 + 1 + 0.5) * 10000
	=	$ 65,000
3)		Variable Cost per unit = Direct Material + Direct Labor + Variable Manufacturing Overhead + Sales commission + Variable admin expense
	=	$ (6 + 3.5 + 1.5 + 1 + 0.5)
	=	$ 12.5
4)		Variable Cost per unit = Direct Material + Direct Labor + Variable Manufacturing Overhead + Sales commission + Variable admin expense
	=	$ (6 + 3.5 + 1.5 + 1 + 0.5)
	=	$ 12.5
5)		Variable Cost = (Direct Material + Direct Labor + Variable Manufacturing Overhead + Sales commission + Variable admin expense)*Units
	=	(6 + 3.5 + 1.5 + 1 + 0.5) * 8000
	=	$ 100,000
6)		Variable Cost = (Direct Material + Direct Labor + Variable Manufacturing Overhead + Sales commission + Variable admin expense)*Units
	=	(6 + 3.5 + 1.5 + 1 + 0.5) * 12500
	=	$ 156,250
7)		Average fixed manufacturing cost per unit = Fixed manufacturing overhead/ Units
	=	(10000 * 4) / 8000
	=	$ 5
8)		Average fixed manufacturing cost per unit = Fixed manufacturing overhead/ Units
	=	(10000 * 4) / 12500
	=	$ 3.2
9)		Its at 10000 units that Fixed Manufacturing Overhead is $4 per unit. So, even if 8000 units are produced, the fixed manufacturing cost incurred to support this level of production is (4 * 10000) = $ 40,000						Note : Here the manufacturing overhead expenditure is fixed, this will not change with the changing units. It will remain the same.
10)		Its at 10000 units that Fixed Manufacturing Overhead is $4 per unit. So, even if 12500 units are produced, the fixed manufacturing cost incurred to support this level of production is (4 * 10000) = $ 40,000
11)		Total variable manufacturing overhead = 1.5 * 8000 = $ 12,000.
		Total fixed manufacturing overhead = 4 * 10000 = $ 40,000.
		Total manufacturing overhead cost = $ (12000 + 40000) = $ 52,000.
		Total manufacturing overhead cost per unit = 52000 / 8000 = $6.5
12)		Total variable manufacturing overhead = 1.5 * 12500 = $ 18,750.
		Total fixed manufacturing overhead = 4 * 10000 = $ 40,000.
		Total manufacturing overhead cost = $ (18750 + 40000) = $ 58,750.
		Total manufacturing overhead cost per unit = 58750 / 12500 = $ 4.7
13)		Variable cost per unit = (6 + 3.5 + 1.5 + 1 + 0.5) = $12.5
		Contribution per unit = Selling price per unit - Variable cost per unit
	=	$(22 - 12.5)
	=	$9.5
14)		Total direct manufacturing cost = (Direct material + Direct labor + variable manufacturing overhead) * Units
	=	( 6 + 3.5 + 1.5 ) * 11000
	=	$ 121,000
		Total indirect manufacturing cost = Fixed manufacturing overhead * Units
	=	4 * 10000
	=	$ 40,000
		Total direct and indirect manufacturing cost = $(121,000 + 40,000)
	=	$ 161,000
15)		Fixed Overhead expenditures will not change with changing units. It will remain the same. All variable overheads along with direct material and direct labor costs will change with changing number of units. So while calculating incremental manufacturing costs we will only consider the variable overheads along with direct material and direct labor costs.
		At 10000 units = ( 6 + 3.5 + 1.5 ) * 10000 = $110,000
		At 10001 units = ( 6 + 3.5 + 1.5 ) * 10001 = $110,011
		Incremental manufacturing costs = $(110,011 - 110,000) = $11